The use of Foundations in wealth and ownership structures have become more complex. Families, entrepreneurs and investors increasingly seek arrangements that provide long-term stability, defined governance and a clear separation between personal ownership and underlying assets.
The Dubai International Financial Centre (DIFC) Foundations Law (Law No3 of 2018) provides a provides a modern common law framework for asset holding, succession planning, wealth management and ownership structuring within a recognised common law jurisdiction.
A DIFC Foundation is a separate legal entity with its own personality that operates independently of its founder. Assets transferred to the Foundation are held in the name of the Foundation itself, rather than by individuals.
Sovereign is a licensed Corporate Service Provider (CSP) in DIFC and advises on the establishment and ongoing administration of DIFC Foundations as part of its private client and corporate services offering.
The key benefits of a DIFC Foundation
A Foundation is a long established legal concept rooted in civil law countries and widely used for asset protection, succession planning and charitable purposes.
While its objectives are similar to those of a trust, a Foundation is neither a trust nor a company. It is an incorporated legal entity with a separate legal personality, enabling it to own assets, enter contracts and sue or be sued in its own name.
Unlike a company, a Foundation has no shareholders, and unlike a trust, it is governed by its own constitutional documents and statutory framework.
A properly structured Foundation can provide effective estate and tax planning solutions, as well as a means of avoiding forced heirship rules. It is particularly attractive to individuals from civil law or Islamic jurisdictions, where the trust concept is not traditionally recognised.
By dedicating assets to clearly defined purposes, a Foundation offers continuity, control and clarity for families and philanthropists alike, without public disclosure of founders, council members, guardians or beneficiaries. Foundations are not obligated to disclose any information to beneficiaries unless specified in their governing documents.
The DIFC Foundation is established for a stated purpose or set of purposes, which are set out in its charter and by-laws. Once established, it operates in accordance with these documents and the applicable DIFC legislation.
Control is exercised through the Foundation Council. The council members are responsible for managing the foundation and ensuring that its purpose is carried out. A Founder of a DIFC Foundation may reserve certain rights, although these are typically defined and limited. The Foundation council can include family members.
Under a Memorandum of Understanding with the Dubai Land Department (DLD), DIFC Foundations are permitted to hold Dubai real estate, and gifting property to a Foundation incurs a lower transfer fee (0.125%) rather the standard 4% DLD transfer fee applied to the property value.
Following the enactment of the Digital Assets Law (No 2 of 2024), the definition of property within a DIFC Foundation has been extended to include ‘Digital Assets’, allowing crypto assets to be held.
Common uses of DIFC Foundations
DIFC Foundations are used in a range of private and commercial situations. The structure is flexible and can be adapted to different objectives as mentioned above.
In many cases, the structure is used as a long-term ownership vehicle rather than as an active operating entity.
Establishment, governance and ongoing administration
Under the DIFC Foundations Law (Law No3 of 2018), the establishment of a DIFC Foundation requires the preparation of a charter and by-laws, appointment of a council and registration with the DIFC Registrar of Foundations.
The Foundation’s charter sets out its name, purpose and basic structure. The by-laws provide the operational detail, including governance, decision-making and the rights and obligations of the various parties involved.
Additional roles may include a ‘guardian’, whose function is to oversee the council and ensure that the Foundation acts in accordance with its stated purpose. This will depend on the objectives of the structure and the level of oversight required.
Once established, the Foundation is subject to ongoing administrative and compliance requirements including maintaining statutory records, keeping constitutional documents up to date and meeting DIFC regulatory obligations.
Although by design these are long-term structures, changes may still be required over time, such as amendments to governance arrangements, changes to council composition or updates to the foundation’s purpose where permitted. Ongoing administration is therefore an important consideration at the structuring stage.
The role of a Corporate Service Provider
A Foundation is required to appoint a DFSA-licensed Corporate Service Provider (CSP) unless it qualifies for exemption. The CSP acts as the primary interface with the DIFC Registrar and is responsible for ensuring ongoing regulatory compliance. Sovereign is licensed by DIFC to provide this registered agent service.
The CSP plays a central role in:
- Company formation and regulatory liaison.
- Maintenance of statutory registers under DIFC law.
- Submission of annual filings.
- Ultimate Beneficial Ownership (UBO) register maintenance.
- Ongoing compliance and formal governance.
Why set up a Foundation in the DIFC?
As a reputable international financial centre, DIFC is a top choice for family business. DIFC Foundations operate under an English common law framework, which increases their appeal to international families living across the UAE and the Middle East. The familiar legal system makes investors more comfortable.
DIFC Foundations offer tax efficiency because they are typically tax-neutral, benefiting from 0% corporate tax, income tax and capital gains tax within the DIFC, making them ideal for asset protection and wealth preservation.
How Sovereign can help
As a licensed Corporate Service Provider in the DIFC, Sovereign advises on the establishment of DIFC Foundations, including company structuring, documentation and registration as well as ongoing administration and support once the foundation is in place. We support high net worth individuals and high net worth families with ongoing compliance and administration as part of our fiduciary duties.
Our work typically involves coordination with legal advisers, family offices and other professional parties, ensuring that the Foundation is implemented and maintained in line with its intended purpose.
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