What Is an SPV?

Smart Investments: What Is an SPV?

To establish business structures and risk management frameworks, companies operating in the UAE can utilise a Special Purpose Vehicle (SPV) under ADGM regulations. This separate legal entity framework is beneficial for companies that wish to isolate financial and legal risks from their core operations. An SPV acts as a holding company to manage and protect specific assets such as real estate, intellectual property or investments. By setting up an SPV, companies can implement "ring-fencing" strategies, meaning any financial difficulties faced by the SPV will not affect the parent company or other entities within the group.

Basic Benefits of Establishing an SPV in ADGM

The basic benefits of the SPV framework give you the following advantages:

• Asset Protection: SPV will protect your assets from creditors or legal challenges, so your core business will be safe.
• Flexibility: SPV can hold all types of assets, real estate, intellectual property or company shares, to manage your holdings better.
• 100% Foreign Ownership: ADGM allows a 100% foreign ownership structure, with no need for a local partner to set up an SPV.
• Fast Setup: Setting up an SPV in ADGM is fast, typically 3-5 days if all documents are ready.
• International Standards: ADGM operates under the English Common Law framework, widely recognised internationally, which gives legal certainty and transparency that attracts global investors.

Nexus Requirements

To set up an SPV in ADGM, you must meet the nexus requirements, which are:

• Controlled by UAE or GCC nationals.
• Holding assets in the UAE or GCC region, although overseas assets are allowed under the regime.
• Facilitating transactions that benefit the UAE or GCC.
• Issuing securities listed on approved platforms within the regime.

These requirements mean the SPV has a connection to the UAE or GCC to promote local economic growth.

Who Should Set Up an SPV in ADGM?

An ADGM SPV is for:

• Real Estate Investors: To hold or finance property investments with extra security.
• High-Net-Worth Individuals: For asset protection, tax-efficient holdings and succession planning.
• Family Offices: To manage and segregate family wealth and assets for future generations through structured vehicles.
• Corporate Entities: To separate high-risk ventures or intellectual property from their main business.
• Multinational Companies: To manage overseas assets and reduce risk.

Tax Benefits of an ADGM SPV

One of the biggest advantages of an ADGM SPV is the tax-efficient framework:

1. Zero Corporate and Personal Tax: ADGM SPVs are not liable for corporate or personal income tax on profits.
 

2. No Withholding Taxes: No tax on transferring profits or dividends to shareholders, including international transfers.
 

3. Access to Double Tax Treaties: UAE has double taxation agreements with many countries to prevent double taxation so your SPV’s profits are not taxed in multiple jurisdictions.
 

4. Corporate Tax Exemption: In the context of UAE corporate tax, ADGM SPVs used solely for holding purposes are expected to be exempt from the corporate tax regime, with additional benefits for businesses managing assets and investments.

Disadvantages of setting up an SPV in ADGM (Full Analysis)

While setting up an SPV in ADGM has its advantages, here are the things to consider:

1. Limited Local Market Access

➨ No Commercial Activities: ADGM SPVs cannot do business or provide products and services in the UAE market. If local operations are needed, entities must set up separate corporate structures for that purpose.

2. Publicly Available Information

➨ Transparency Requirements: Information about your SPV, including directors and ownership details, is publicly available through the regulatory framework. This transparency requirement may not be suitable for entities who prefer to keep their asset management private. While ADGM has robust regulatory compliance, some clients may not like this transparency.

3. Substance Requirements

➨ UAE Presence Obligations: Although ADGM’s substance requirements are less stringent than other jurisdictions, entities still need to show presence in the UAE. This may require local directors or specific business activity which adds operational complexity.

4. Annual Fees and Reporting

➨ Continuing Costs of Operation: Operating an SPV in ADGM is not only costly to set up, but has continuing obligations beyond just paying annual fees for license renewals. Entities need to file regulatory reports and remain compliant with all ongoing obligations. Negligence could describe actions/penalties.

5. Limited Activities

➨ Limited Work: SPVs are considered holding entities for assets, whether it's real estate or an IP asset, and cannot conduct regular trading or commercial activity.  However, if the entity expects or desires to have a more active business component, as noted above, other corporate vehicles would be more appropriate and cost-effective.  

6. Resident Director Requirement

➨ Local Representation Obligation: An SPV must appoint a UAE or GCC resident director or authorised signatory. For non-UAE local and non-GCC investors, the local representation requirement likely means engaging with supplemental local service providers, incurring additional costs.

7. Better suited for larger entities

➨ Guiding Principles: An SPV is an ideal vehicle for larger companies or individuals with larger assets.  Most start-up companies likely will find the cost of establishing and ongoing operation of an SPV does not provide economic value; again, there are better options among other corporate vehicles. 

8. Newer vehicle than DIFC

➨ Using the vehicle: While ADGM has grown by leaps and bounds over the recent years, ADGM is still a much newer vehicle than DIFC.  DIFC has a much longer market presence and, established reputation in a multitude of operating sectors, including finance/insurance.  It may be preferred by various businesses/models to have the "DI" established credibility, especially in the finance/insurance sectors.

Therefore, to learn more about the What Is an SPV, Book a free consultation with one of the Flyingcolour Business Setup team advisors.

The article was published on 12/08/2025. It is important to note that the federal policies and updates mentioned may have changed since then. For the most current information, please contact our consultant!