TRW & Co · Private Wealth & Family
Foundations and Trusts in the UAE
Foundations in the UAE give families an incorporated vehicle to hold shares, investments and property outside probate, with rules on how wealth passes between generations. ADGM and DIFC offer foundations and trusts under common-law courts, and corporate tax rules let qualifying family foundations be treated as transparent. Choosing well depends on governance, recognition abroad and tax.
Key pointA UAE family foundation can apply to the Federal Tax Authority to be treated as a transparent unincorporated partnership, but an LLC cannot qualify on its own; it benefits only as a wholly owned subsidiary of a qualifying foundation or trust.
At a glance
Two common-law regimes
ADGM's Foundations Regulations 2017 and DIFC Foundations Law No. 3 of 2018 both offer incorporated foundations with separate personality, firewall provisions and specialist common-law courts.
Guardian rules differ
An ADGM guardian is optional while the founder lives but compulsory after death; a DIFC guardian is mandatory for purpose foundations, such as charitable ones.
Trusts without registration
ADGM trusts follow English common law and equity, need no formal registration, and require an enforcer for non-charitable purpose trusts; professional trustees need FSRA authorisation.
Tax transparency available
Article 17 of the Corporate Tax Law lets qualifying family foundations apply to the FTA for unincorporated partnership treatment; the FTA updated its guide in June 2026.
Transfers make it work
A foundation protects only assets actually transferred into it and properly governed; unmoved property and shares still pass through ordinary succession on death.
Swipe or scroll →
What foundations in the UAE are used for
Foundations in the UAE are incorporated vehicles, with their own legal personality, that hold assets for named beneficiaries or for a purpose. Families use them to keep shares, investment portfolios and property out of probate, to set rules for how wealth passes between generations, and to separate family assets from operating risk. Trusts do similar work through a different legal mechanism.
Interest has grown for practical reasons. Many founders who built businesses in Dubai and Abu Dhabi now want succession that does not depend on a court identifying heirs after their death. Families relocating from the UK, India and elsewhere want a holding vehicle in a stable, English-language common-law environment. And the corporate tax regime introduced in 2023 created a specific route for family foundations to be treated as tax transparent.
A foundation is not the right answer for every family. It costs money to set up and maintain, it needs real governance, and it does not escape mandatory rules simply by existing. The sections below explain the options and the trade-offs.
The legal framework: DIFC, ADGM, RAK ICC and onshore
There is no single law on foundations in the UAE. Each regime has its own legislation, registrar and court, and the choice between them shapes cost, governance and how disputes are resolved.
ADGM foundations and trusts
Abu Dhabi Global Market was first, with the ADGM Foundations Regulations 2017. An ADGM foundation is governed by a council with duties similar to company directors. A guardian, who supervises the council, is optional during the founder's lifetime but becomes compulsory after the founder's death. Non-exempt foundations must appoint an ADGM-registered company service provider, and the public register does not list individuals' names even though the registrar receives full disclosure. Foundations can redomicile into and out of ADGM.
For trusts, ADGM applies English common law and equity under the Application of English Law Regulations 2015, supplemented by the Trusts (Special Provisions) Regulations 2016. ADGM guidance on trusts confirms that no formal registration is required, that an enforcer is mandatory for non-charitable purpose trusts, and that a valid ADGM trust is not voided by foreign laws that do not recognise trusts or impose heirship claims. Professional trustees need FSRA authorisation.
DIFC foundations and trusts
The Dubai International Financial Centre followed with DIFC Law No. 3 of 2018 (the Foundations Law) and DIFC Law No. 4 of 2018 (the Trust Law). A DIFC foundation is run by its council under a charter and by-laws, and the founder may reserve powers. A guardian is mandatory for purpose foundations, such as charitable ones, and optional where the foundation benefits specific persons. Beneficiaries are called qualified recipients. A registered agent, licensed by the DIFC Authority as a corporate service provider, assists with incorporation, compliance and the registered office.
The DIFC's family business and private wealth offering also includes a Family Wealth Centre. Significant changes to a DIFC foundation must be reported to the registrar, so governance is ongoing, not a one-off filing.
RAK ICC and the onshore trusts law
The RAK International Corporate Centre also offers foundations, typically at lower running cost, and is often used for holding structures. Onshore, Federal Decree-Law No. 19 of 2020 regarding Trusts introduced a federal trust regime outside the financial free zones. Uptake has been cautious, and most families continue to use DIFC or ADGM vehicles where common-law courts and established practitioners support them.
| Feature | ADGM foundation | DIFC foundation | ADGM or DIFC trust |
|---|---|---|---|
| Legal basis | ADGM Foundations Regulations 2017 | DIFC Foundations Law No. 3 of 2018 | English common law and ADGM regulations; DIFC Trust Law No. 4 of 2018 |
| Legal personality | Yes | Yes | No; trustees hold legal title |
| Guardian or enforcer | Optional while founder alive; compulsory after death | Mandatory for purpose foundations; optional otherwise | Protector optional; enforcer needed for non-charitable purpose trusts |
| Service provider | ADGM-registered CSP for non-exempt foundations | DIFC-licensed registered agent | Professional trustees need regulatory authorisation (FSRA in ADGM) |
| Public registration | Registered; individuals' names not on public register | Registered with the DIFC Registrar | No formal registration of the trust in ADGM |
| Courts | ADGM Courts | DIFC Courts | ADGM Courts or DIFC Courts |
Foundation or trust: how to choose
The choice between foundations in the UAE and trusts is less about tax and more about how a family wants to govern wealth and how counterparties will treat the structure.
Counterparty recognition
A foundation is an entity, so it can open bank accounts, sign contracts and own shares in its own name. Many banks, land registries and licensing authorities in the region are more comfortable dealing with an entity than with trustees. Families from civil-law countries, including much of the Gulf and continental Europe, often find the foundation concept easier to understand than a trust.
Governance and control
Foundations let the founder sit on the council or reserve specific powers, and the charter and by-laws can set detailed rules on distributions, succession to council seats and family participation. Trusts depend on the trustee, which suits families who want independent professional management but can feel distant to founders who want continued involvement. Reserving too much control can undermine asset protection and tax outcomes in other countries, so the balance matters.
Familiarity abroad
UK, Singapore and Indian advisers are familiar with trusts, and tax authorities in those countries have established rules for them. Foundations can be classified unpredictably abroad, sometimes as companies, sometimes as trusts. If beneficiaries live in a high-tax country, get advice there before choosing.
Philanthropy and purpose structures
Some families want part of their wealth to support education, health or community causes over the long term. Both ADGM and DIFC foundations can be established for a purpose rather than for named people, and ADGM recognises public interest purpose foundations. A purpose foundation needs a guardian or similar oversight, because there are no beneficiaries to hold the council to account. Charitable activity inside the UAE may also need approvals from the relevant community development or endowment authority, so check before launching public-facing programmes.
Who sits on the council
The council is where most structures succeed or fail. A council made up only of the founder and a spouse may be simple, but it leaves the foundation exposed if both are unavailable. A council of professionals alone may lack the family's trust. Many families combine one or two family members with an independent professional, and set out in the by-laws how the next generation joins, what training is expected and how deadlocks are broken. Link these rules to any family constitution so the two documents tell the same story.
The structure that works is the one the family will actually govern: a council that meets, by-laws that are followed and records that a bank or court can rely on.
Corporate tax and foundations in the UAE
Since the UAE introduced corporate tax under Federal Decree-Law No. 47 of 2022, every structure must be considered for tax. Article 17 allows a family foundation that meets its conditions to apply to the Federal Tax Authority to be treated as an unincorporated partnership, meaning it is transparent for corporate tax and income is assessed in the hands of the founders or beneficiaries instead.
The conditions include a beneficiary test: the foundation must be established for identified or identifiable natural persons, a public benefit entity, or both. The FTA's updated guide on family foundations, released in June 2026, confirms several practical points. A limited liability company cannot itself qualify as a family foundation, but a company wholly owned and controlled by a qualifying foundation or trust can benefit. A company owned by more than one family foundation may now apply for partnership treatment, which the previous guidance did not allow.
The guide also confirms that single-family and multi-family offices are generally taxable in their own right, although an office in a free zone carrying out activities regulated by the DFSA or FSRA may be able to access the qualifying free zone person regime if it meets the conditions. Where a founder who is an individual transfers personal or real estate investments into the structure, no corporate tax should arise; other transfers to related family foundations are measured at arm's length. Our corporate tax team reviews these points alongside the legal design.
Setting up a foundation: step by step
- Define the objectives. Agree in writing what the structure must achieve: succession, asset protection, consolidation of holdings, philanthropy or a combination. This determines beneficiaries, purposes and governance.
- Map assets and residences. List assets by location and the tax residence of the founder and every likely beneficiary. Identify assets that cannot easily be transferred, such as mortgaged property or shares subject to pre-emption rights.
- Choose jurisdiction and vehicle. Compare ADGM, DIFC and RAK ICC foundations, and trusts, against the objectives, cost and the familiarity of banks and foreign advisers.
- Draft the charter and by-laws. Set council composition, guardian powers, reserved powers, distribution rules, succession to council seats and dispute resolution. Draft a letter of wishes to sit alongside.
- Complete due diligence and registration. Appoint the service provider or registered agent, provide beneficial ownership and source-of-wealth information, and file the application with the relevant registrar.
- Transfer the assets. Execute share transfers, property transfers and account openings. Each asset has its own process and some, such as onshore property, need specific approvals.
- Run the governance. Hold council meetings, keep minutes and accounts, file annual returns and changes on time, and review the structure when laws or family circumstances change.
Documents and information to prepare
Registrars and service providers apply anti-money laundering checks, so expect detailed requests. Prepare the following early.
- Passports, proof of address and CVs for the founder, council members, guardian and beneficiaries.
- A source-of-wealth narrative supported by documents, such as company accounts, sale agreements or employment history.
- A schedule of assets to be transferred, with valuations, title documents and any third-party consents needed.
- Existing wills, shareholder agreements and family constitutions, so the new structure does not conflict with them.
- Tax advice from each country where the founder or beneficiaries are resident.
- A draft letter of wishes explaining the founder's intentions to the council.
Registering a foundation is the easy part. The protection only works if assets are actually transferred into it, properly documented and managed by the council. An empty or loosely run foundation offers little more than a will.
Risks and common mistakes with foundations in the UAE
Leaving assets outside the structure
Families often register a foundation and then delay moving assets into it. Property remains in the founder's name, shares are never transferred and bank accounts stay personal. On death, those assets go through ordinary succession, which defeats the purpose. Build the asset transfers into the project plan, with named owners and deadlines, and confirm completion with the council. Where an asset cannot be moved immediately, the founder's will should deal with it in a way that is consistent with the foundation.
Too much founder control
Founders understandably want to keep control. But if the founder can revoke the foundation at will, direct every distribution and replace every council member, a court or foreign tax authority may treat the assets as still belonging to the founder. That can expose the assets to the founder's creditors, to claims on divorce and to tax at home. Reserve specific, defined powers and build in a guardian or independent council member where asset protection matters.
Assuming firewalls defeat every claim
ADGM and DIFC legislation contains firewall provisions that protect structures from foreign heirship rules and foreign judgments. These are valuable, but they are not absolute. Courts can still set aside transfers that are fraudulent, made to defeat existing creditors, or contrary to public policy. Assets located outside the financial free zones may be subject to local courts and rules. Plan transfers when the founder is solvent and there are no pending disputes, and keep evidence of that.
Ignoring beneficiaries' home tax rules
A UAE foundation can be tax-efficient locally and still create tax costs elsewhere. A UK-resident beneficiary, for example, may be taxed on distributions, and some countries attribute a foundation's income to the founder. Indian and other tax authorities have their own rules on foreign structures. Before distributions begin, obtain advice in each beneficiary's country of residence and document the classification used, so distributions are reported correctly.
Neglecting compliance filings
Foundations and trusts are subject to beneficial ownership, economic substance and anti-money laundering rules. Late filings and outdated registers lead to penalties and can cause banks to freeze or exit relationships. Trustees in ADGM must keep beneficial ownership information during their appointment and for five years afterwards. Assign responsibility for filings to a named person or provider, and diarise annual returns, licence renewals and corporate tax obligations.
Cross-border planning: UK, India, Bangladesh, Singapore and the GCC
Most families who use foundations in the UAE have assets or relatives in other countries, and those countries decide how they treat the structure. A foundation does not automatically move foreign assets out of foreign probate or foreign tax.
For UK-connected families, check how a UAE foundation or trust will be classified for UK inheritance and income tax, especially after the UK's move to a residence-based regime in April 2025. Indian families should consider Indian rules on overseas investment and the treatment of foreign trusts and entities. Bangladeshi families should consider exchange control rules on moving funds abroad and how Bangladeshi courts would treat a foreign structure holding family assets. Singapore assets may sit more comfortably in a Singapore-recognised vehicle.
Within the GCC, Saudi and other Gulf families sometimes use ADGM or DIFC foundations as a neutral holding layer for regional businesses. That raises questions on foreign ownership rules, licensing and Sharia-compliant succession, all of which should be addressed before assets move. TRW & Co works with colleagues across our network, including Dhaka, London and Singapore, to coordinate these questions.
How TRW & Co helps
We provide advisory, structuring and coordination work. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Structure design
We compare foundations, trusts and holding companies against the family's goals, assets and residences, and set out the costs, governance load and tax points in a written recommendation.
Charters and by-laws
We draft charters, by-laws, trust deeds and letters of wishes that reflect how the family actually makes decisions, including succession to council seats and dispute resolution.
Asset migration
We plan and document transfers of shares, property and investments into the structure, including third-party consents and coordination with banks and registries.
Tax coordination
We work through the Article 17 family foundation rules and coordinate with advisers in beneficiaries' countries, so the structure is consistent at home and abroad.
Governance support
We help councils and trustees run proper meetings, keep records and meet filing obligations, and we review structures when laws or family circumstances change.
Disputes and restructuring
Where family members disagree, or a structure no longer works, we advise on options, from amending by-laws to redomiciling or winding up.
This work connects with our wills and succession advice, our family office work, family business governance and beneficial ownership registers. Our AML compliance team supports source-of-wealth preparation. See the full list of practices.
Checklist for decision-makers
- Write down what the structure must achieve and for whom.
- Map assets, their locations and the tax residence of every beneficiary.
- Compare ADGM, DIFC and RAK ICC foundations with trusts on cost, recognition and governance.
- Decide what powers the founder will reserve, and why.
- Check Article 17 corporate tax treatment and foreign tax treatment before registering.
- Plan and complete asset transfers, not just the registration.
- Align wills, shareholder agreements and family constitutions with the structure.
- Assign responsibility for filings and schedule an annual review.
To discuss whether foundations in the UAE suit your family, contact TRW & Co at info@trw.co.
Frequently asked questions
01What is the difference between a foundation and a trust in the UAE?
A foundation is a separate legal entity that owns its assets and is run by a council under a charter and by-laws. A trust is a relationship in which trustees hold assets for beneficiaries or a purpose, without creating a new entity. Foundations are often easier for banks and civil-law families to understand, while trusts are familiar to UK, Singapore and Indian advisers. Both are available in the ADGM and DIFC, each with its own courts and service provider requirements.
02Should we choose an ADGM or a DIFC foundation?
Both are common-law regimes with firewall provisions, perpetual existence and specialised courts. Differences lie in detail: guardian requirements, service provider rules, disclosure on the public register and costs. ADGM makes a guardian compulsory after the founder dies, while DIFC requires one for purpose foundations. Practical factors often decide it, such as where the family lives, where its banks and businesses sit, and which service providers it trusts. Compare current fees and requirements before deciding.
03Is a UAE family foundation subject to corporate tax?
It can be. Under Article 17 of the Corporate Tax Law, a family foundation that meets the conditions may apply to the Federal Tax Authority to be treated as an unincorporated partnership, making it transparent for corporate tax. The FTA's guide updated in June 2026 confirms that an LLC cannot itself qualify, but wholly owned subsidiaries of qualifying foundations can benefit, and companies owned by several family foundations may now apply. Family offices are generally taxable separately.
04Can a foundation protect assets from forced heirship rules?
ADGM and DIFC legislation includes firewall provisions designed to stop foreign heirship rules and foreign judgments from unwinding a validly established structure. That gives meaningful protection, but it is not absolute. Courts can set aside transfers that are fraudulent, sham or contrary to public policy, and assets outside the free zone, especially abroad, may still be subject to local rules. Muslim families should take specific advice on how Sharia succession rules interact with the structure.
05How long does it take to set up a foundation?
Registration itself can be relatively quick once documents are ready, often a matter of weeks. The longer part is preparation: agreeing objectives, drafting the charter and by-laws, completing due diligence and source-of-wealth checks, and obtaining tax advice abroad. Asset transfers then follow and can take longer, particularly for property and shares that require approvals. Plan for the whole project, not just registration.
06Can a foundation own Dubai property?
Foundations can hold property, often through a wholly owned company, but eligibility depends on where the property is, the land registry's rules on which entities may be registered owners, and any lender consents if the property is mortgaged. Transfer fees and procedures also apply. Check the position with the Dubai Land Department or relevant registry and the lender before including property in the plan, and consider whether a holding company sitting under the foundation is the cleaner route.
07Is there an onshore UAE trust law?
Yes. Federal Decree-Law No. 19 of 2020 regarding Trusts introduced a federal trust regime outside the financial free zones. In practice, families have been cautious about using it, and most private wealth structures continue to use ADGM or DIFC trusts and foundations, which benefit from common-law courts, established practitioners and detailed guidance. The onshore regime may suit particular cases, but advice is needed on how it interacts with personal status rules.
Sources and official materials
- ADGM: Trusts in ADGM — Trust law, enforcers, firewall and AML obligations in ADGM
- ADGM launches first foundations regime in the UAE — Announcement of the ADGM Foundations Regulations
- DIFC: Family businesses and private wealth — DIFC foundations, trusts and Family Wealth Centre
- Federal Decree-Law No. 47 of 2022 on Corporate Tax — Article 17 family foundation treatment
- Federal Tax Authority — Corporate tax guides, including family foundations
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
