The UAE: A Strategic Hub for Private Wealth Management
India Focus
Driven by its visionary 2030 goals, the UAE is rapidly emerging as a global hub for private wealth management. The country's progressive policies are luring international financial institutions, and and high-net-worth individuals (HNWIs).
Law Update: Issue 370 - From Africa to Asia: Legal Narratives of Change and Continuity
Dipali MaldonadoSenior Counsel,Private Client Services
Izabella SzadkowskaPartner,Corporate Structuring
Sabeeha MoollaProfesional Support Lawyer,Corporate Structuring
Driven by its visionary 2030 goals, the UAE is rapidly emerging as a global hub for private wealth management. The country's progressive policies are luring international financial institutions, family offices, and and high-net-worth individuals (HNWIs). This focus on wealth preservation makes the UAE an attractive destination for those seeking sophisticated financial guidance to secure their assets for future generations.
Underpinning this growth is a surge in HNW migration. According to the 2024 Henley & Partners report, India is a leading source of this migration, with a projected net inflow of 4,500 millionaires to the UAE in 2024. This represents a 50% increase from the previous peak in 2016, highlighting the UAE's growing appeal to Indian wealth holders.
Below is a mere snapshot of the reasons why many family offices, family businesses and HNW investors are relocating to the UAE and making it home for both their families and employees:
Streamlined Immigration: The UAE boasts a welcoming immigration regime, simplifying the process of relocating families and employees.
Tailored Wealth Structuring: A wide range of structuring options offer families flexibility and control over their wealth across generations.
Family Business Focus: The UAE actively supports family businesses, fostering a supportive environment for their continued success.
Flexible Inheritance Laws: Flexible inheritance laws provide families with peace of mind regarding asset transfer.
Foreign Ownership Freedom: 100% foreign ownership is permitted in many sectors, further enhanced by a network of free zones offering additional benefits.
Corporate Tax Advantages: The UAE has one of the lowest corporate income tax rate within the GCC region at a standard rate of 9% with various exemptions available. This stands in stark contrast to India's corporate tax structure.
Individual Tax Advantages: The UAE attracts millionaires with its zero income tax policy. This is different to India's income tax system, which uses a slab system, where different tax rates are assigned to respective income brackets.
World-Class Quality of Life: The UAE is ranked as the second safest country out of 163 nations. Three emirates rank among the top 10 safest cities globally.
Connectivity Hub: The UAE's strategic location and advanced infrastructure provide excellent travel links and a convenient time zone.
Expat-Friendly Culture: The UAE is known for its welcoming attitude towards expatriates and offers a high quality of life.
Market stability: The UAE has emerged as a beacon of economic resilience amidst global uncertainty. The nation's strategic pivot from an oil-dependent economy to a diversified powerhouse, coupled with visionary government policies, has fostered a thriving business ecosystem. Positioned as a global trade and financial hub, the UAE has attracted significant foreign investment and maintained a robust real estate market. These factors, combined with a strong financial system, have fortified the UAE's position as a leading economic player, capable of weathering economic storms and driving continued growth.
Hub for Indian Enterprises: Dubai has become a hub for Indian enterprises, as evidenced by a staggering 39% surge in registrations of Indian-owned companies, according to Mohammad Ali Rashed Lootah, President and CEO of Dubai Chambers (formerly Dubai Chamber of Commerce & Industry).
The UAE’s thriving economy is underpinned by a dynamic private sector, which the government actively nurtures through policies that protect private wealth. This commitment translates into concrete action. The government provides the necessary legislative, structural, and regulatory tools to ensure private wealth remains protected across generations.
The UAE has become a favoured destination for global investors seeking to establish family offices. This article delves into the reasons behind this trend, examining the UAE's supportive legal framework and comparing it to traditional offshore jurisdictions
Streamlined policies and digital platforms expedite company formation, making the UAE an attractive hub. Recognizing the significance of attracting foreign direct investment (FDI), high-net-worth individuals (HNWIs), and top talent, the government has implemented measures like the coveted golden visa scheme, absence of personal income tax, and an alluring lifestyle.
The UAE boasts an estimated USD 966 billion in private wealth, with projections indicating a 40% increase in HNWIs by 2031. Furthermore, the UAE prioritizes tax and succession planning by providing valuable resources for private wealth management.
The global migration of high-net-worth individuals is accelerating. A record-breaking 128,000 millionaires are set to relocate in 2024, surpassing the previous year's total. The UAE and the United States are emerging as top destinations for these individuals, who are defined as individuals with investable assets of at least $1 million or Rs 8.3 crore.
Dubai's real estate market offers a unique double appeal: a vibrant lifestyle destination and a promising investment opportunity. Foreign investors are welcome to participate in this prosperity. Dubai allows freehold ownership in designated areas and gives investors complete control over their property. Beyond the glitz of the city centre, Dubai boasts landscaped communities, green havens, and a variety of living options, from urban chic to suburban tranquillity. This, coupled with the potential for high returns makes Dubai an attractive place for real estate investment.
The UAE has passed Federal Decree Law No. 50/2023, amending certain provisions of Federal Law No. 28 of 2005 concerning Personal Status. These changes officially came into effect on November 30, 2023.
The new personal status law makes the UAE more attractive to investors, and some of the reasons are as follows:
Increased Certainty and Flexibility: The law allows non-Muslims to choose a civil legal system (as opposed to one based on sharia principles) that applies to their personal matters. This provides investors with more control and predictability regarding marriages, divorces, inheritances, and child custody arrangements.
Simplified Marital Procedures: The introduction of civil marriage and no fault divorce streamlines the process of getting married and divorced. Prenuptial agreements can also be registered with the UAE courts and will be enforced, making it possible for parties to agree on financial terms that would apply in the event of a martial dissolution.
Gender Equality: The law promotes equal rights and responsibilities for men and women in areas of inheritance and child custody.
Clearer Succession Planning: The law allows for greater control over asset distribution through wills. HNWI and family businesses can ensure their wealth is transferred smoothly and according to their wishes, promoting long-term stability and continuity.
In essence, the new law creates a more transparent, predictable, and business-friendly legal environment for personal matters, making the UAE an attractive destination for relocation and investment.
The UAE's golden visa program unlocks a wealth of opportunities for investors. By granting long-term residency, it eliminates the hassle of frequent visa renewals and fosters a sense of stability, ideal for those making significant investments. The UAE's golden visa doesn't just offer residency, it gives HNWIs a base to explore and capitalize on the country's thriving economy. This can be highly attractive to global investors looking to expand their business ventures.With these advantages, the golden visa makes the UAE a compelling destination for investors seeking a secure and residency-friendly environment to grow their wealth.
Having explored the UAE's appeal for investors and family businesses, let's now examine the available options for Family Offices.
While the UAE offers an array of solutions for family offices, here we particularly focus on the offering of:
Abu Dhabi Global Market (“ADGM”);
Dubai International Financial Centre (« DIFC»);
Dubai World Trade Centre (“DWTC”); and
Dubai Multi Commodities Cente (“DMCC”).
ADGM and DIFC: These free zones operate under common law, modelled after the Anglo-Saxon legal system. They boast independent courts staffed by experienced judges familiar with international commercial law. This offers businesses a familiar legal framework and an efficient dispute-resolution process.
DWTC: This free zone adheres to civil law, similar to the legal system in mainland Dubai. Disputes arising within this zons fall under the jurisdiction of the local Dubai onshore courts.
This dual system caters to a wider range of investors and businesses. Those seeking a common law environment with established commercial legal principles can choose ADGM or DIFC. Those comfortable with the civil law system can opt for DWTC. This flexibility, along with the UAE's strategic location, business-friendly environment, and infrastructure development, is fueling its rise as a global commercial hub and a strong competitor to some of the more mature or traditional global business hubs.
Established in 2015, the ADGM has emerged as a leading global financial center offering a world-class business ecosystem. Its robust regulatory framework facilitates the establishment of various legal entities, making it an ideal platform for optimizing family wealth planning and managing family businesses, both domestically and internationally.Family Offices:
A family can form a single family office (“SFO”) in ADGM. The SFO would take the form of a private company limited by shares, and the liability of the shareholders would be limited only up to the shareholders’ capital contribution.
The SFO can provide to the family a variety of services, including wealth management, concierge work, management of the day to day accounting and legal affairs, corporate governance support, and administrative services. The SFOs are, however, not permitted to offer any of these services to any third party other than the family’s own members, entities, businesses, trusts or foundations.
An SFO can utilize multiple SPVs to compartmentalize assets, mitigating potential risks to the overall portfolio and thus offering a versatile structure for private wealth holdings and investments. Unlike operational businesses, SPVs function exclusively as passive investment vehicles, capable of owning diverse assets such as stocks, bonds, other long term or short term investments, private equity or venture capital investments, real estate, or intellectual property. Operating without employees or physical premises, SPVs streamline asset management. To facilitate SPV setup, family offices often engage Company Service Providers (CSPs) to handle incorporation, recordkeeping, and registered office administration.
The ADGM also offers foundations to families and HNWIs. A Foundation is an entity which a founder(s) can endow with assets. It has its own legal personality, separate from its founder(s) and beneficiaries.
The principal family can use a Foundation to channel its charitable activities, proprietory investments and/or to allocate assets for the benefit of certain (e.g. young) beneficiaries. If appointed as a council member, the SFO can monitor and oversee this as well.
The governance of the Foundation is based on the following documents:
Charter: This document outlines the Foundation's essential details, including its name, objectives, purpose, and lifespan.
Bylaws: These bylaws define how the Foundation is governed, makes decisions, functions on a day-to-day basis and who the beneficiaries are.
Generally, the Foundation needs to have council members (who would be the governing body for the Foundation, similar to a board of directors), a guardian (to monitor that the council members are acting in line with the Foundation’s goals and for the benefit of the beneficiaries), and a designee (to avoid a scenario of the Foundation having no beneficiaries). While the applicant would disclose to ADGM the relevant parties in a Foundation, this information is not disclosed on the Public Register.
A Foundation cannot have employees or a physical office space. It is required to appoint a CSP.
General Overview:
Established in Dubai in 2004, the Dubai International Financial Centre (DIFC) has solidified its position as a global financial powerhouse. Its independent regulatory system, coupled with full business ownership and flexible legal structures, creates an unparalleled environment for businesses.
To enhance its family office offering, the DIFC introduced the Family Office Regulations in 2023. These regulations provide a broad framework for family offices to operate within the Centre, offering a wide range of permissible activities.
Family offices in the DIFC can offer a comprehensive suite of services, categorized into two primary groups:
Unrestricted Services: These can be provided to a single family without additional regulatory requirements and encompass areas such as advisory, investment management, and family support functions.
Restricted Services: To offer these services to multiple families, a family office must obtain specific licenses from the Dubai Financial Services Authority (DFSA). These services typically involve financial activities like investment dealing, custody, and fund management
A DIFC family office can be established as a company, partnership, or foundation. While a common ancestor is not mandatory, the office must serve the interests of a defined family. To qualify, a family office must demonstrate a minimum net asset value of USD 50 million.
The DIFC's robust regulatory environment, coupled with its flexible structure, positions it as an attractive location for family offices seeking to establish a secure and efficient base for managing their wealth and affairs.
HoldCos: Standard or Prescribed Companies In addition, the family could hold and administer its private portfolio of assets under a HoldCo, formed in the DIFC. The HoldCo is an operational company mainly set up for the purpose of holding and making investments on behalf of the shareholders, and not third parties.
The HoldCo could take the form of a standard company or a prescribed company (subject to certain eligibility criteria).
While the standard HoldCo would be required to secure a physical office in the DIFC and would be subject to full licensing fees, as a prescribed company it could benefit from symbolic license fees and could use the registered address of a DIFC corporate service provider.
A DIFC Foundation is a versatile legal entity with separate legal personality, serving various purposes like wealth management, family succession planning, and philanthropic activities.
The establishment process involves founders submitting a comprehensive application to the Registrar, detailing essential information such as objectives, initial capital, and governance structure.
While optional, the appointment of a registered agent streamlines communication with the DIFC, requiring annual account submissions. Guardians, though not obligatory for all Foundations, play a pivotal role in ensuring the fulfilment of objectives, especially in cases of charitable or specified non-charitable purposes.
Regarding physical presence, the Foundation isn't mandated to maintain office space within the DIFC. However, should it not opt for having an office, engaging a corporate service provider becomes imperative to obtain a registered address. This arrangement allows the Foundation to conduct operations efficiently, including the possibility of hiring employees, if required.
The DWTC, functioning as an economic free zone, presents cost-effective and adaptable company formation packages. Therefore, it presents an attractive option to families. There are no mandatory minimum share capital requirements albeit there are minimum asset requirement of AED 500,000 in proven liquid assets that need to be met by the applicant's family
The SFO and Multi-Family Office (“MFO”) licenses are a good option for families seeking to manage their wealth.
Dubai is rapidly emerging as a global business hub, particularly attractive to Indian investors. With over 15,000 new Indian-owned companies joining the Dubai Chamber of Commerce in 2023 alone, the city's allure is undeniable for the Indian disapora. Dubai's strategic location, world-class infrastructure, and business-friendly policies have fostered a thriving startup ecosystem, earning it the moniker "the next Silicon Valley."
The UAE's recent introduction of progressive personal status laws, coupled with its robust corporate structuring framework, has solidified its position as a premier wealth management destination. These laws, addressing inheritance rights, prenuptial agreements, and family governance, are expected to attract a surge of high-net-worth individuals (HNWIs) seeking stability and clarity in their estate planning.
A Knight Frank report forecasts a remarkable 39% increase in the UAE's HNWI population by 2026, surpassing 228,000 individuals. This burgeoning HNWI base underscores the criticality of wealth structuring strategies. By carefully crafting wealth structuring plans, individuals and families can safeguard assets, facilitate seamless intergenerational wealth transfer, and minimize tax implications.
Al Tamimi & Company offers comprehensive Private Client Services and Corporate Structuring solutions tailored to the unique needs of HNWIs, families, and family businesses. Our expert team provides strategic legal counsel across estate planning, wealth management, succession planning, and family governance. We assist clients in structuring and safeguarding their assets, ensuring efficient wealth management and smooth transitions to future generations. Additionally, we support family businesses in optimizing corporate structure, governance, and operations, aligning with the family's long-term vision and values.
Our unwavering commitment lies in delivering tailored solutions that preserve and enhance private wealth, strengthen family bonds, and safeguard business interests within the region.
For further information,please contact Dipali Maldonado, Izabella Szadkowska, and Sabeea Moolla.
Published in September 2024
