GERMANY TO UAE · FOUNDATION FORMATION

DIFC Foundation Formation for German Entrepreneurs and Families

A DIFC Foundation can be useful when the main concern is not simply starting a company, but deciding how assets, investments or family interests should be held and managed over time.

Start Your DIFC Foundation Formation

For German entrepreneurs, investors and families with assets or business interests in the UAE, a DIFC Foundation can provide a separate legal structure for succession planning, wealth structuring, family arrangements and certain charitable or non-charitable purposes. DIFC describes foundations as one of the structures available for family businesses and private wealth planning.

The important point is that a foundation is not a substitute for an operating company. It is a different type of legal vehicle, designed around ownership, governance, assets and long-term arrangements.

Flyingcolour® Business Setup can assist with the practical formation process and documentation for clients considering a DIFC Foundation from Germany.

01 / YOUR GUIDE

What Is a DIFC Foundation?

A DIFC Foundation is a separate legal entity established under the DIFC Foundations Law. If you also need an operating entity, consider DIFC company formation separately from the foundation’s ownership structure.

Unlike a traditional trust arrangement, the foundation is a body corporate with its own legal personality. Its property belongs to the foundation rather than being held by it on trust for another person. The DIFC Foundations Law also allows a foundation to continue for a fixed period or without a fixed duration, depending on how it is established.

The foundation is established by a Founder who contributes property to it. Its structure is built around documents such as the Charter and By-laws, together with the people responsible for its administration and oversight.

That makes the structure quite different from simply registering another UAE company.

02 / YOUR GUIDE

Why Consider a DIFC Foundation?

The reason for creating a foundation usually comes from the ownership or succession problem you are trying to solve.

For example, a German business owner may have:

Shares in UAE or international companies
Investment portfolios
Real estate interests
Family wealth
Intellectual property
Other assets that require a long-term ownership structure
A family business that needs a succession arrangement
Charitable or other permitted objectives

A foundation can be structured around specific objectives and beneficiaries or classes of beneficiaries, depending on its governing documents and the applicable DIFC law. The Foundations Law permits both exclusively charitable objects and certain non-charitable or beneficiary-focused objects.

The right structure depends on the assets involved, the family circumstances and the legal and tax position of the people concerned.

03 / YOUR GUIDE

DIFC Foundation or Company?

This is one of the first questions to settle. When comparing asset-holding structures, assess DIFC prescribed companies alongside the foundation’s purpose and governance needs.

A company is generally established to conduct business. A foundation is more commonly considered where the focus is ownership, asset holding, succession, governance or a defined long-term purpose.

For example, an operating company might sign contracts, employ staff and invoice customers. A foundation may instead sit above an ownership structure and hold shares or other assets according to its Charter and By-laws.

The two structures can therefore work together.

A family may operate a trading company, investment company or other business while using a separate structure for ownership and succession planning. Whether that arrangement is appropriate depends on the particular circumstances.

04 / YOUR GUIDE

Who Can Establish a DIFC Foundation?

DIFC allows individuals and corporates to establish a foundation, subject to the applicable requirements.

For a German entrepreneur, this can mean establishing a DIFC Foundation as part of a wider international wealth or family structure.

The Founder is the person who contributes property to establish the foundation. The rights retained by a Founder depend on what is provided in the By-laws and the applicable DIFC framework.

The Founder does not simply transfer assets and walk away from the structure without considering governance. The foundation needs to be designed carefully so that its documents reflect how it is intended to operate.

05 / YOUR GUIDE

How Is a DIFC Foundation Structured?

A DIFC Foundation has several important roles.

Founder

The Founder establishes the foundation and contributes property to it.

The Founder may have certain rights under the By-laws, depending on how the foundation has been structured.

Council

The Council is responsible for administering the foundation in accordance with its governing documents and the applicable DIFC requirements.

The composition and responsibilities of the Council should be considered carefully because this is not simply an administrative formality.

Guardian

A Guardian may be appointed where the structure requires one. The role is connected to oversight of certain aspects of the foundation and should be defined in the governing documents.

Beneficiaries or other specified persons

The foundation's By-laws can provide rights to specified persons or classes of persons, depending on the purpose and structure.

Registered Agent

The Registered Agent has an important administrative and compliance role within the DIFC framework.

DIFC has also amended its Foundations Law to expand the role of Registered Agents, including provisions allowing arrangements with the Registrar of Companies for certain compliance-related functions.

The exact structure should therefore be designed before registration rather than treating these roles as standard boxes to tick.

06 / YOUR GUIDE

What Can a DIFC Foundation Be Used For?

A foundation can be established for different permitted objectives.

Depending on the circumstances, it may be considered for:

Family succession

A foundation can provide a framework for managing family assets and ownership interests over generations.

This can be particularly relevant where a business owner wants to establish rules for how family wealth or company interests should be dealt with after retirement or death.

Holding company interests

A foundation can form part of a wider structure for holding shares or other ownership interests.

The actual assets and proposed ownership chain need to be reviewed before the structure is established.

Wealth structuring

Families with multiple assets may use a foundation as part of a broader wealth management arrangement.

This does not automatically create a particular tax result. German tax residence, asset location, ownership, control and reporting obligations all need to be considered separately.

Family governance

A foundation can help formalise arrangements around family assets and succession rather than leaving every decision to informal family agreements.

Charitable purposes

The DIFC Foundations Law permits foundations to have exclusively charitable objects, subject to the applicable legal requirements.

Non-charitable purposes

The law also permits certain non-charitable objects and arrangements intended to benefit specified persons, categories or classes.

The proposed purpose should be clearly defined before the Foundation is registered.

07 / YOUR GUIDE

Why German Residents Need to Look Beyond the UAE Structure

A DIFC Foundation is established under DIFC law, but that does not mean its creation automatically determines the tax treatment in Germany.

This is an important distinction.

If you are resident or tax resident in Germany, you may have German tax and reporting considerations relating to the foundation, its assets, distributions, control arrangements or underlying companies.

The same applies where the Founder, beneficiaries or assets are located in different countries.

For that reason, German tax advice should be considered alongside the DIFC formation process. The UAE structure should be designed with the wider international position in mind rather than treated as a standalone registration exercise.

Flyingcolour® Business Setup can assist with the UAE formation side, while tax and legal advice in Germany should be obtained from appropriately qualified advisers where required.

08 / YOUR GUIDE

What Documents Are Generally Required?

The documentation depends on the proposed structure and the people or entities involved.

Depending on the application, information and documents may include:

Passport or identification documents
Residential address information
Founder details
Council member information
Guardian information where applicable
Registered Agent information
Proposed Foundation name
Foundation purpose and objects
Charter
By-laws
Details of contributed assets
Corporate documents where a company is involved
Supporting ownership information
Additional compliance or due diligence documents

If a corporate Founder or asset-holding company is involved, additional company documents may be required. Where an underlying business needs banking facilities, plan its corporate bank account application as a separate due-diligence process.

Documents originating outside the UAE may also require certification or other formalities depending on the circumstances.

The final document list should be confirmed for the proposed structure before submission.

09 / YOUR GUIDE

The DIFC Foundation Formation Process

The process becomes easier when the structure is decided before the application starts. Refer to DIFC’s official foundation resources.

Step 1: Understand the purpose

Start with the reason for creating the foundation.

Is it for family succession, holding assets, ownership of company shares, charitable objectives or another permitted purpose?

Step 2: Review the assets

Identify what is expected to be contributed to the foundation.

This could include shares, investment interests or other property, subject to the applicable requirements.

Step 3: Decide the governance structure

The Founder, Council, Guardian and other relevant roles should be considered together.

The aim is to create a structure that works in practice rather than one that only looks suitable on paper.

Step 4: Prepare the Charter and By-laws

These documents form an important part of the foundation's operating framework.

They should reflect the intended purpose, governance arrangements and rights within the structure.

Step 5: Prepare the supporting documents

The required identification, corporate and ownership documentation is collected and reviewed.

Step 6: Submit the application

The application is processed through the DIFC Registrar of Companies. The Registrar handles applications relating to foundations under the DIFC Foundations Law and applicable regulations.

Step 7: Complete the formation

Once the applicable requirements are satisfied, the foundation can be established and the remaining administrative and compliance arrangements can be completed.

The DIFC Registrar of Companies is responsible for incorporation and registration matters relating to DIFC entities, including Foundations.

10 / YOUR GUIDE

How Much Does DIFC Foundation Formation Cost?

The cost depends on the structure and the services required.

DIFC’s published fee table lists foundation registration as nil and an operating licence fee of USD 350 plus AED 20 at setup and on annual renewal. Additional professional, registered agent, documentation and other costs may apply depending on the arrangement.

The registration fee should therefore not be treated as the total cost of establishing and maintaining a foundation.

Your overall budget may need to account for:

DIFC registration fees
Registered Agent costs
Professional advisory fees
Document preparation
Certification or legalisation where required
Governance-related arrangements
Annual administration
Accounting or tax advice
Legal advice
Ongoing compliance

A proper quotation should be prepared around the actual structure rather than using a generic package price.

11 / YOUR GUIDE

DIFC Foundation and German Tax Planning

The phrase "tax planning" needs to be handled carefully.

A DIFC Foundation may form part of an international wealth structure, but the existence of a UAE foundation does not by itself determine the German tax treatment.

For a German resident, relevant questions can include:

Where is the Founder resident?
Where are the beneficiaries resident?
What assets are being transferred?
Where are those assets located?
Who has decision-making rights?
What rights are retained by the Founder?
Are there underlying companies?
Are distributions expected?
What German reporting obligations may apply?

These questions should be answered before assets are transferred.

DIFC has specifically positioned foundations within its private and family wealth framework, but international tax consequences remain dependent on the individual circumstances.

12 / YOUR GUIDE

DIFC Foundation for Family Business Succession

For a family-owned business, succession can become complicated when ownership is divided between several family members.

A foundation can be considered as part of a structure intended to establish rules around long-term ownership and family interests.

For example, instead of transferring business shares directly between several family members, a properly structured arrangement may place ownership within a foundation and define the relevant rights through its governing documents.

This does not remove the need for legal and tax planning. It simply provides another legal structure that can be considered when designing the overall arrangement.

DIFC itself lists foundations alongside family offices and holding companies as structures available within its family business framework.

13 / YOUR GUIDE

DIFC Foundation vs DIFC Trust

A foundation and a trust are not the same structure.

A DIFC Foundation is a separate legal entity with its own legal personality. Its property is not held by the foundation on trust for another person.

A trust operates differently and involves a trustee holding and administering trust property according to the relevant trust arrangement.

Which structure is appropriate depends on the assets, objectives, family arrangements and legal and tax considerations.

For German families, the distinction is particularly important because the UAE legal structure and the German tax treatment should both be considered before choosing between different wealth planning vehicles.

14 / YOUR GUIDE

Common Mistakes When Setting Up a DIFC Foundation

Starting with the registration fee

The formation fee is only one part of the decision. Governance, professional advice, administration and ongoing compliance also need to be considered.

Treating a foundation like a normal company

A foundation is not simply another business licence. Its purpose and governance need to be established clearly.

Creating the structure before reviewing German tax implications

If the Founder or beneficiaries have German tax connections, the German position should be reviewed before assets are transferred.

Leaving the By-laws until the end

The By-laws are central to how the foundation operates. They should be considered as part of the structure from the beginning.

Using a generic structure for a complicated family arrangement

A family with multiple businesses, properties and beneficiaries may need a more carefully designed structure than a straightforward asset-holding arrangement.

Assuming that every asset can simply be transferred

Asset transfers can involve legal, tax, regulatory or registration requirements. Each asset should be reviewed before any transfer takes place.

15 / YOUR GUIDE

What Flyingcolour® Business Setup Can Help With

Establishing a DIFC Foundation from Germany can involve several moving parts, particularly when the Founder, beneficiaries, companies and assets are located in different countries.

Flyingcolour® Business Setup can assist with the UAE side of the process, including:

Initial discussion of the proposed Foundation structure
DIFC Foundation formation support
Founder and Council documentation
Coordination of required information
Charter and By-laws documentation support
Application preparation
DIFC registration coordination
Registered Agent coordination where applicable
Supporting documentation
Related UAE corporate structuring requirements

Where German tax or legal questions arise, specialist advice in Germany should be obtained so that the UAE structure is considered alongside the client's wider obligations.

16 / YOUR QUESTIONS

Frequently Asked Questions

What is a DIFC Foundation?

A DIFC Foundation is a separate legal entity established under the DIFC Foundations Law. It can be used for permitted charitable, non-charitable, family and asset-structuring purposes.

Can a German citizen establish a DIFC Foundation?

Individuals and corporates can establish DIFC Foundations subject to the applicable requirements. A German citizen can therefore explore the structure where the proposed arrangement meets the relevant DIFC requirements.

Can a DIFC Foundation hold company shares?

A foundation can form part of an ownership structure involving company interests, subject to the applicable legal and structural requirements.

Can a DIFC Foundation be used for succession planning?

Yes. Succession and family wealth planning are among the areas for which DIFC presents foundations as part of its private and family wealth framework.

Does a DIFC Foundation automatically reduce German taxes?

No automatic tax result should be assumed. German tax treatment depends on the individual structure, residence, assets, control arrangements and applicable German rules.

Does a DIFC Foundation need a Registered Agent?

The applicable DIFC requirements regarding the Registered Agent should be confirmed for the proposed Foundation structure. The DIFC Foundations Law provides for the role of Registered Agents within the framework.

How long does DIFC Foundation formation take?

The timeframe depends on the structure, documentation, due diligence and any additional requirements. A fixed timeframe should only be given after reviewing the proposed application.

How much does it cost to establish a DIFC Foundation?

DIFC’s published fee table lists nil foundation registration fees and an operating licence fee of USD 350 plus AED 20 at setup and annually. The complete cost can be higher once professional and ongoing services are included.

Can a DIFC Foundation be used for charitable purposes?

Yes. The DIFC Foundations Law permits foundations to be established for exclusively charitable objects, subject to the applicable requirements.

Can a Foundation have non-charitable purposes?

Yes. The law permits certain non-charitable objects and arrangements benefiting persons by name, category or class, subject to the applicable provisions.

Can Flyingcolour® Business Setup help with DIFC Foundation formation?

Flyingcolour® Business Setup can assist with the UAE formation process, documentation and coordination of the DIFC registration requirements. German tax or legal matters should be addressed with appropriately qualified advisers where required.

LET’S TALK BUSINESS

Start Your DIFC Foundation Formation

A DIFC Foundation should be built around the reason you need it, the assets involved and the people who will ultimately be affected by the structure.

For German entrepreneurs and families, that means looking at the DIFC requirements together with the wider German and international position before assets are transferred or ownership arrangements are changed.

Flyingcolour® Business Setup can help you understand the UAE formation process, prepare the required information and coordinate the practical steps involved in establishing a DIFC Foundation.

Discuss your proposed structure with Flyingcolour® Business Setup to begin the formation process.

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