Crypto
Jul 6, 2025
The UAE is a significant player in the global crypto market and has developed a reputation for being business-friendly and open to innovation. One of the latest chapters in the UAE's Crypto journey involves the Dubai International Financial Centre Foundation, which has introduced a new legal framework for crypto, blockchain, and digital assets.
The foundation aims to create a comprehensive ecosystem for businesses operating within the digital asset space. This guide will explore how the new framework established by the DIFC Foundation can help you. Are you seeking legal guidance to understand the implications of the new rules for your business? You’re in the right place.
Ape Law’s web3 legal experts can help you achieve your objectives, including obtaining expert legal solutions tailored to your needs. Our team is thoroughly familiar with the new legal framework established by the DIFC Foundation. We can help you stay informed about the latest regulations and get your business on the right track.
Table of Content
What is a DIFC Foundation?
A DIFC Foundation is an independent legal entity established under the DIFC Foundations Law. It combines the benefits of a trust and a company, offering a structure that is particularly well-suited for asset protection, estate planning, and charitable initiatives. Unlike a trust, which relies on a trustee to hold and manage assets, a foundation owns its assets outright.
This ownership structure enhances control and reduces the complexities associated with traditional trust arrangements. At the same time, the DIFC Foundation benefits from the DIFC’s internationally recognized legal system, which is based on English common law principles.
Key Features of a DIFC Foundation Independent Legal Entity
A DIFC Foundation is distinct from its founders and beneficiaries. This separation ensures that the foundation’s assets are shielded from personal liabilities and external claims.
Flexibility in Purpose
DIFC Foundations can be established for a wide range of purposes, including:
Succession planning for family businesses.
Holding and managing assets, such as real estate or intellectual property.
Philanthropic and charitable goals.
Control and Governance
The foundation’s operations are governed by a charter and bylaws, which outline its purpose and management structure. A foundation council oversees its activities, ensuring compliance with the founder’s intentions.
Confidentiality
The DIFC maintains strict confidentiality around foundation details, making it an attractive choice for those seeking privacy.
Tax Efficiency
The DIFC operates within a tax-neutral framework.
Foundations benefit from zero corporate and personal income tax, no withholding tax, and no restrictions on the repatriation of capital or profits.
DIFC Foundation vs Trust
1. Legal Status and Structure: DIFC Foundation vs. Trust
It is essential to understand that a DIFC foundation is a legal entity. A foundation has an independent corporate structure. This means it can own assets and enter contracts in its name, just like a company. On the other hand, a DIFC trust doesn’t have a legal status of its own. Instead, it operates as a fiduciary arrangement. The trust itself has no legal personality separate from its trustees.
2. Founder Control: Who’s the Boss?
With a DIFC foundation, the founder retains a high level of control, even after death. The founder can directly influence governance, appoint or remove council members, and maintain significant control through charter and bylaw provisions. In comparison, a DIFC trust typically requires the settlor to cede control upon establishment. Trustees manage the trust’s assets by the trust deed and often have discretion over their duties.
3. Governance and Flexibility: Which Operates Better?
The governance of a DIFC foundation is structured around a foundation council (and possibly a guardian). The operating charter and by-laws enable flexible internal rules, which can be customized and amended over time. Conversely, while trusts offer flexibility in terms of beneficiary rights, their governance heavily depends on the trustee's discretion and the terms of the trust deed. They are generally less adaptable to ongoing governance changes.
4. Asset Protection: Which One Offers Better Protection?
DIFC foundations offer strong asset protection. Assets are separated from both the founder’s estate and external claims. They are designed to shield against forced heirship, creditors, and foreign judgments. In comparison, DIFC trusts offer protection that largely depends on the trustee's decisions and the structure of the trust. In general, they’re strong but not as robust as a foundation’s shield.
5. Succession and Duration: What Happens When the Founder Passes?
You can establish a DIFC foundation with perpetual duration—there’s no expiry unless stipulated. This makes them useful for long-term or multi-generational planning. Founders can issue non-binding “Letters of Wishes” to guide the council after their death. On the other hand, DIFC trusts are typically established for a fixed term defined in the trust deed and may conclude once their assets have been fully distributed.
6. Complexity and Setup: Getting Started
Setting up a DIFC foundation is more complex—you must draft a charter and bylaws, and establish a council or guardian. In contrast, DIFC trusts are generally simpler to establish, relying primarily on the trust deed and trustee appointment, making them less cumbersome in the short term.
7. Practical Applications: Which One Suits Your Needs?
A DIFC foundation is ideally suited for individuals or families who want to retain control, benefit from a standalone legal structure, and plan for long-term wealth preservation and governance. A DIFC trust is better for those seeking a more straightforward structure, who are comfortable with relinquishing control, and who want a simpler vehicle for asset transfer.
Which One Should You Choose?
You might consider a DIFC foundation if your goals include:
Maintaining a level of control over assets and governance
Long-term family succession planning
A formal legal entity with strong asset protection
Willingness to manage a slightly more complex setup
You might opt for a DIFC trust if:
Do you prefer a simpler, less administrative structure
You’re ready to transfer control to trustees
You need a straightforward mechanism for safeguarding and transferring wealth
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Benefits of Setting Up a Foundation in DIFC
Tax Benefits of Establishing a DIFC Foundation
The DIFC offers a tax-friendly environment, and foundations established within its jurisdiction also enjoy the same. Currently, there is no corporate tax, income tax, or capital gains tax in the DIFC. For families with international assets and beneficiaries, DIFC Foundations can play a crucial role in minimizing global tax exposures.
DIFC Foundations allow you to centralize the ownership of assets in a tax-neutral jurisdiction. By doing so, they significantly lower the burden of inheritance taxes and also reduce the complexities of cross-border asset transfers. UAE’s commitment to the OECD Inclusive Framework simplifies compliance requirements for DIFC Foundations.
Smooth Succession With DIFC Foundations
DIFC Foundations are also used as vehicles for succession planning and smooth generational wealth transfers. Foundations accumulate assets under a single structure. This simplifies the process of wealth management and transfers in various scenarios, including the founder’s incapacity or death.
Privacy is another crucial aspect of succession planning through foundations. They differ from wills, which become public documents upon probate. The details of a foundation’s assets and beneficiaries remain confidential. This privacy can help prevent potential family disputes and protect beneficiaries from unwanted attention.
Asset Protection Benefits of DIFC Foundations
One of the key advantages of DIFC Foundations is their solid framework for asset protection. The foundation establishes a legal separation between the founder’s assets and those held by the foundation. This structure protects the assets against potential claims from creditors, family members, or other parties who might otherwise have claims against the founder’s assets. DIFC Foundations can hold a wide variety of assets, including:
Shares in companies (both operating and non-operating)
Investments in listed stocks, bonds, and commodities
Real estate
Bank accounts
Aviation assets
Notably, DIFC Foundations are permitted to own real estate in designated areas of Dubai that are open to foreign ownership. A memorandum of understanding exists between DIFC and the Dubai Land Department regarding the provision of this facility. In fact, in some cases, the property transfer fee is reduced from 4% to 0.125%. However, you must demonstrate that the beneficial owner remains the same.
Confidentiality of DIFC Foundations
Foundations offer limited public disclosure requirements to protect the privacy of founders and beneficiaries.
Flexibility of DIFC Foundations
Foundations offer high flexibility with customizable governance structures and distribution mechanisms.
International Recognition of DIFC Foundations
The DIFC’s reputation as a leading financial center globally lends credibility to its legal structures.
Legal Certainty of DIFC Foundations
The application of common law principles, combined with the presence of the DIFC Courts, provides a reliable legal framework.
Setting up a crypto business in the UAE can be complex, but Ape Law makes it smooth. As Web3-native legal experts, we handle crypto licensing, business structuring, and compliance so you can focus on growth. Whether you’re launching a new coin, token, and/or NFT, expanding operations, or optimizing for tax efficiency, our team ensures a smooth and legally sound setup. Ready to establish your business in the UAE? Book a free consultation today to navigate the legalities of setting up a Web3 business in the UAE with ease!
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How to Set Up Foundations in DIFC in 8 Steps
1. Use Ape Law: Your Ultimate Guide to Setting Up a DIFC Foundation
Establishing a crypto business in the UAE can be complicated, but Ape Law makes it smooth. As Web3-native legal experts, we handle crypto licensing, business structuring, and compliance so you can focus on growth. Whether you’re launching a new coin, token, and/or NFT, expanding operations, or optimizing for tax efficiency, our team ensures a smooth and legally sound setup. Ready to establish your business in the UAE? Book a free consultation today to navigate the legalities of setting up a Web3 business in the UAE with ease!
2. Collation of Documents: The First Step to a DIFC Foundation
The first step in setting up a DIFC Foundation involves gathering the necessary documentation. This includes detailed Know Your Customer (KYC) information on the following individuals:
Founder: The person or entity establishing the foundation.
Council Members: Individuals appointed to manage the foundation’s affairs.
Guardian: The person responsible for overseeing the foundation and ensuring compliance with its charter and by-laws.
Collecting comprehensive KYC documentation is crucial for compliance with regulatory requirements and ensures that the foundation operates within the legal framework established by the DIFC.
3. Preparation of Resolutions and Legal Documents: Drafting Your DIFC Foundation's Charter
Once the documentation is in place, the next step is to prepare the necessary resolutions and legal documents. This includes drafting the Charter and By-Laws of the foundation.
While standard templates are available, we recommend customizing these documents to align with the client's specific needs and objectives. Customization ensures that the foundation’s governance structure, operational procedures, and overall mission reflect the founder’s intentions and requirements.
4. Finalization of Registered Address: Where Your DIFC Foundation Lives
A foundation must have a registered address in the DIFC. This address can be either a physical location within the DIFC or provided by a registered corporate service provider. Selecting a reliable registered agent is crucial, as they will assist with compliance matters and ensure the foundation meets all its legal obligations.
5. Initial Submission to the DIFC Registrar of Companies: Kicking Off Your DIFC Foundation Application
One of the key steps in setting up a DIFC Foundation is applying to the DIFC Registrar of Companies. It should include the Charter, By-Laws, KYC details, and proof of the registered address.
6. DIFC Review/Clarifications and Responses: The DIFC's Review Process
Upon receiving the application, the DIFC Registrar will review the submitted documents. During this stage, the Registrar may request additional clarifications or information. It is crucial to respond promptly and accurately to any inquiries to facilitate the approval process.
7. Final Approvals: Receiving the Green Light for Your DIFC Foundation
Once the DIFC Registrar is satisfied with the application and all required clarifications have been addressed, the foundation will receive final approvals. At this stage, the foundation is officially formed, and the founders can begin to execute its objectives.
8. Bank Account Opening and Visa Applications (if applicable): Closing Out Your DIFC Foundation Setup
Among the key steps to set up a DIFC Foundation, the final procedure involves opening a bank account and applying for any necessary visas for council members or staff. A bank account is essential for managing the foundation’s finances and ensuring its objectives are met effectively.
Book a Free Consultation to Navigate the Legalities of Setting up a Web3 Business in the UAE
Setting up a crypto business in the UAE can be complex, but Ape Law makes it smooth. As Web3-native legal experts, we handle crypto licensing, business structuring, and compliance so you can focus on growth. Whether you’re launching a new coin, token, and/or NFT, expanding operations, or optimizing for tax efficiency, our team ensures a smooth and legally sound setup. Ready to establish your business in the UAE? Book a free consultation today to navigate the legalities of setting up a Web3 business in the UAE with ease!
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