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Asset Protection in the UAE

The United Arab Emirates (UAE) offers political and economic stability, double tax treaties with more than 60 jurisdictions worldwide, and an environment free of income and corporate tax (with few exceptions) and offers some generally desirable strong points for developing succession and estate planning solutions.

However, the local legal system (“onshore”) can pose significant obstacles, particularly for non-Muslim aliens, inherent in Sharia law application and its characteristics, especially concerning the heritage requirements.

Asset Protection in the UAE

Proposal for DIFC Value

By launching the Dubai International Financial Center (DIFC), the Dubai Emirate has solved these issues in a free zone setting with a state-of-the-art autonomous judicial system based on English common law. The DIFC free zone was launched in 2004 and offered a modern regulatory and state-of-the-art infrastructure that has since attracted several international banks, brokers, and other intermediaries from the financial services industry to its ecosystem.

In the meantime, the DIFC has rapidly developed both in terms of resident companies and its image. It has recently obtained the 10th position among the most important financial centres globally (“The Banker” – 2017 rankings of the IFC), significantly outstripping its rivals as the leading financial hub in the area.

From trust to the family business

The so-called “trust law” was introduced in 2005 as the first step towards family offices to allow a trust created within the DIFC that provides beneficial ownership of land or shares to a defined group, the beneficiaries, while separating control management and legal ownership rights. ”

In 2008, the regulators extended the DIFC rule to cover the regulations of the Single-Family Office to allow single-family offices to effectively manage family institutions, private wealth, and estate and tax planning in the centre.

As defined in the framework, the DIFC Single Family Office is a DIFC company or partnership offering services solely to a single-family.

The single-family bureau, in turn, has several benefits in terms of both original and continuing reporting and accountability duties imposed by the regulator since it is limited to giving wealth advice, asset management or fiduciary services to non-natural or legal people.

Architecture is adaptable.

A DIFC-domiciled SFO may be set up in numerous legal forms, including a limited liability partnership. By the legislation, the internal SFO is limited to providing services alone.

  • Family members of an individual family (individuals),
  • Fiduciary family structures,
  • both familial entities and
  • family enterprises.

The family must establish at least USD 10 million in liquid/investible assets and produce evidence of the individual’s family relationship. In the same way, family trust structures must be related to the vesting family and the beneficiary side. In contrast, family enterprises are enterprises or enterprises under the supervision of the family.

Although the DIFC was initially totally protected from the onshore economy (UAE), recent policy modifications adopted in May 2017 allow DIFC-based companies to own property and operate onshore (necessary licenses provided), thereby making the free zone largely semi-permeable.

Building Blocks: Key to flexibility

The Single Family Office may or may not be the legal owner of the property undermanaged by only requesting that there be an existing connection between the family office and the natural individuals composing the family or its relevant fiduciary family structures, companies or businesses. It might be formed as a holding company or simply as a service provider that only offers services to the family.

Other methods of tailoring the overall structure according to the legal and operational requirements of the family property include intermediate holding companies (“Intermediary SPVs”), frequently designed to partition retaining structures along business lines. They are economical to establish and manage and are excluded from the requirement for a private physical address (lease space) as long as their relevant holding business already lives in the area.

Insofar, the legislative framework gives an enormous degree of flexibility about the organisation of worldwide family assets and the control, interconnection, or protection desired between them.

In control: planning succession

Regardless of the single-family office limitations, a Wills and Probate Registry complement the financial centre of the DIFC. The DIFC registration and enforcement procedure are consistently founded on common law principles, which grants substantial discretion to testators to dispose of their inheritance instead of placing them under specific legal provisions on distribution or forced marriage regime.

In the event of succession, and according to the will of the DIFC Wills and Probate Registry, both within the DIFC and the Emirate of Dubai, the DIFC Court shall issue grants and court orders to be directly enforceable without the need to go to the courts in Dubai.

Summary

The DIFC offers a range of robust and intricate building blocks for families outside of the well-known domiciliation choices. The DIFC has evolved since it was established, representing a top jurisdiction and enabling flexible, scalable and highly adaptable family office and holding structures.

In addition, the DIFC presence of good service providers provides the possibility of externalizing services in asset management and private banking, fiduciary and specialized legal, accounting and auditing, to name a few.

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