Foundations in the UAE: Your Gateway to Protected Wealth and Tax Efficiency in the UAE

06 May 2025 - Oksana Sukhar

Foundations are becoming an increasingly popular tool for wealth planning in the UAE, offering a smart solution for asset protection, succession, and tax efficiency. Traditionally linked to philanthropy, they're now used by investors, entrepreneurs, and families to manage and safeguard assets long-term. Blending the benefits of trusts and companies, foundations give clients control while staying compliant. The UAE stands out for its progressive legal framework, offering flexible, globally aligned structures ideal for real estate, business exits, and legacy planning.

When Structure Meets Strategy – Tax Optimization with a UAE Foundation

An EU-based investor with residential property in Dubai recently restructured his holdings using an Abu Dhabi Global Market (ADGM) Foundation—a strategic move aimed at long-term tax efficiency and succession planning. With the right advisory support, the investor was able to obtain “Unincorporated Partnership” treatment for the foundation, enabling income generated from the property to flow directly to his heirs. This approach not only simplified inheritance but significantly reduced international tax exposure, showcasing how the UAE’s modern foundation framework can offer tailored solutions for global investors.

If you’re evaluating the right structure for holding, protecting, or passing on assets in the UAE, it’s essential to understand how foundations compare to traditional trusts and companies. While they may serve similar purposes such as wealth management, investment holding, or legacy planning—their legal nature, control mechanisms, and tax treatment differ significantly.

Feature	Foundation	Trust	Company
Legal Status	Separate legal entity	Not a legal entity (a fiduciary relationship)	Separate legal entity
Ownership	No shareholders; governed by charter/by-laws	Assets held by trustee for beneficiaries	Owned by shareholders
Control	Founder/guardian has control via by-laws	Trustee controls, subject to trust deed	Directors manage on behalf of shareholders
Asset Protection	High (founder can separate assets legally)	High (assets held outside personal estate)	Moderate (assets may be exposed to creditors)
Succession Planning	Strong (by-laws define inheritance, avoid probate)	Strong (trust deed defines distribution)	Requires will or probate for succession
Regulation in UAE	Regulated in DIFC, ADGM, RAK ICC	Available in DIFC & ADGM only	Broadly available across free zones/onshore
Tax Treatment (UAE)	Can apply for pass-through status (0%)	Discretionary trust not taxed, beneficiaries may be	Subject to UAE corporate tax (9% standard)
Privacy	High (beneficiaries not publicly listed)	High (private arrangement)	Varies (companies may be subject to disclosure)
Use Case Examples	Holding investments, succession, philanthropy	Estate planning, minor heirs, family legacy	Operating business, commercial activity

With the introduction of the UAE Corporate Tax Law, many investors are turning to foundations for a compliant way to protect returns. If structured properly, a UAE foundation can qualify as an Unincorporated Partnership—meaning it isn’t taxed at the entity level, and income flows directly to beneficiaries. To be eligible, the foundation must benefit identifiable individuals or the public, be limited to asset and wealth management (not commercial activity), and be formally recognized via the EmaraTax platform.

The UAE offers three main jurisdictions for setting up foundations, each suited to different needs. DIFC is known for its prestige and strong legal framework, making it a top choice for high-net-worth individuals with international assets. ADGM stands out for its global recognition and solid governance, ideal for managing complex family or institutional wealth. For those looking for a more cost-effective and flexible option, RAK ICC offers a streamlined setup that's popular with entrepreneurs and private investors managing smaller portfolios.

How can Sovereign PPG help?

Setting up a foundation in the UAE involves more than just legal paperwork. From selecting the right jurisdiction to drafting by-laws and securing special tax treatment, expert guidance is essential. At Sovereign Group, we offer comprehensive foundation advisory and administration services tailored to your specific needs. Whether you’re restructuring assets or planning a new investment, our team ensures your foundation is fully compliant and aligned with your long-term goals. For assistance with foundation planning or related services in the UAE, contact us at +971 4 270 3400, email sovppg@sovereigngroup.com, or fill out the contact form below—we’d be happy to help.