UAE Foundations vs Holding Companies for Property Ownership
ADGM, DIFC, and RAKICC Structures
This guide compares these structures across ADGM, DIFC, and RAKICC, helping you make an informed decision.
The UAE’s property market has become increasingly attractive to investors and residents alike.
With its tax-friendly environment, world-class infrastructure, and high quality of life, the UAE is a top choice for those seeking relocation, retirement, or property portfolio diversification.
As more individuals acquire multiple properties, the question arises: At what point should ownership transition from an individual’s name to a corporate entity, such as a holding company or SPV?
Two prominent options arise for those considering the best legal structure for property ownership: Foundations and Holding Companies.
Key Differences Between Foundations and Holding Companies
| Aspect | Foundations | Holding Companies |
|---|---|---|
| Definition | A legal entity with no shareholders, managed by a council, is designed to hold assets for specific purposes. | A company structure primarily for holding assets and investments, with shareholders. |
| Purpose | Asset protection, succession planning, wealth management. | Investment management, corporate structuring, and profit generation. |
| Liability | Separate legal entity; liabilities do not extend to founders or beneficiaries. | Limited liability for shareholders. |
| Tax Residency | Can obtain tax residency certificates in the UAE. | Can also obtain tax residency certificates in the UAE. |
| Complexity | Somewhat complex due to council and governance structures. | Relatively straightforward. |
Foundation Comparison Across ADGM, DIFC, and RAKICC
| Feature | ADGM Foundation | DIFC Foundation | RAKICC Foundation |
|---|---|---|---|
| Initial Setup Costs | USD 3,300 | USD 3,700 | USD 2,000 |
| Timeline to Set Up | 3-4 weeks | 3-4 weeks | 2-3 weeks |
| Compliance | Regular audits, annual filings, and council meetings. | Similar to ADGM, with specific DIFC governance rules. | Minimal; annual filings required. |
| Tax Treatment | Zero corporate tax (with UAE residency certificate). | Zero corporate tax (with UAE residency certificate). | Zero corporate tax (with UAE residency certificate). |
| Land Department Fees | 4% of the property value (Dubai Land Department). | 4% of the property value (Dubai Land Department). | 4% of the property value (Dubai Land Department). |
| Pros | Strong asset protection and succession planning. | High regulatory credibility, suitable for complex structures. | Cost-effective and straightforward for holding property. |
| Cons | Higher setup and maintenance costs. | Higher setup and maintenance costs. | Limited asset protection and estate planning features. |
Holding Company (SPV) Comparison Across ADGM, DIFC, and RAKICC
| Feature | ADGM SPV | DIFC SPV | RAKICC SPV |
|---|---|---|---|
| Initial Setup Costs | USD 5,000 | USD 6,000 | USD 2,500 |
| Timeline to Set Up | 2-3 weeks | 2-3 weeks | 1-2 weeks |
| Compliance | Annual filings, shareholder resolutions, minimal auditing. | Annual filings and adherence to DIFC corporate governance rules. | Minimal compliance; annual filings only. |
| Tax Treatment | Zero corporate tax (with UAE residency certificate). | Zero corporate tax (with UAE residency certificate). | Zero corporate tax (with UAE residency certificate). |
| Land Department Fees | 4% of the property value (Dubai Land Department). | 4% of the property value (Dubai Land Department). | 4% of the property value (Dubai Land Department). |
| Asset Protection | Strong asset protection. | Strong asset protection. | Adequate asset protection. |
| Credibility | Highly regarded jurisdiction. | High credibility for international investors. | Moderate credibility. |
| Governance | Registered office required; adherence to ADGM rules. | Adherence to DIFC-specific rules. | Simplified governance. |
| Flexibility | Wide flexibility for structuring assets. | Flexible and suited for complex structures. | Highly flexible and cost-efficient. |
| Pros | Robust asset protection; international standards. | High credibility and investor trust. | Cost-effective and simple setup. |
| Cons | Higher costs and compliance requirements. | Higher costs; strict governance rules. | Lesser recognition internationally. |
Owning Property in an Individual Name vs Through a Foundation or Holding Company
For UAE property owners, the choice between owning property in an individual name or through a foundation/holding company has significant implications.
Here’s what you need to know:
| Aspect | Individual Ownership | Foundation or Holding Company Ownership |
|---|---|---|
| Simplicity | Direct ownership avoids complex structures and associated costs. | Additional administrative burden due to setup and governance requirements. |
| Initial Costs | No setup or annual maintenance fees. | Higher setup and annual maintenance fees. |
| Control | Full and direct control over the property. | Control is governed by the foundation’s council or the holding company’s governance structure. |
| Liability Exposure | Property may be at risk in case of personal financial issues or legal claims. | Limits exposure to personal liabilities and legal claims. |
| Estate Planning | Inheritance may be governed by Sharia law if no alternative arrangements are in place. | Ensures smooth transfer of ownership to beneficiaries as per the founder’s wishes. |
| Tax Residency | Does not automatically provide tax residency benefits. | Easier to obtain UAE tax residency certificates, beneficial for international investors. |
| Credibility | Ownership is in the individual’s name, which may lack the professionalism of a corporate structure. | Adds a layer of professionalism and governance, especially for high-value properties. |
Key Considerations
Purpose of Ownership:
- For asset protection, estate planning, or philanthropy, consider foundations (ADGM or DIFC).
- For straightforward property ownership and investment, a holding company (RAKICC) might be a better fit.
Compliance and Governance:
- Foundations require stricter governance with council meetings and audits.
- Holding companies have simpler compliance requirements.
Cost Sensitivity:
- RAKICC offers cost-effective solutions with lower setup and maintenance fees.
- ADGM and DIFC provide added regulatory credibility but at higher costs.
Property Registration Fees:
- Property purchases incur a 4% registration fee with the Dubai Land Department or similar fees in other emirates. Ensure these are factored into your budget.
Conclusion
Choosing between a foundation and a holding company for property ownership in the UAE depends on your specific needs and priorities.
- Foundations (ADGM and DIFC): Offer robust asset protection and estate planning benefits but come at higher costs and complexity.
- Holding Companies (RAKICC): Provide a simpler and more affordable solution, suitable for direct property investment.
For property owners considering individual ownership, the simplicity and lower costs are attractive, but asset protection and succession planning challenges may arise.
For tailored advice and assistance in setting up your foundation or holding company, consult a trusted business setup expert to guide you through every step of the process.
In contrast, a RAKICC Holding Company provides a simpler and more affordable solution, suitable for direct property investment.
Note: You are MINUTES away from finding out your UAE Foundation or Holding Company Setup Cost with only a few questions. Use our Cost Calculator for your Business License in Dubai or anywhere in the UAE.
