The UAE As The Premier Destination For Family Offices
|The UAE has become the premier destination for Family Offices as family wealth in the Middle East and indeed across the world grows. Many High-Net-Worth-Families (HNWF) are opening family offices in the UAE because of the many benefits that the UAE presents including; the advantageous tax regime and overall business environment, among other factors. For families to centralise functions to manage their family wealth and business interests, setting up a family office in the UAE is the most flexible and efficient investment vehicle.
One of the primary factors driving billionaires and millionaires to the UAE is the presence of the two major global onshore financial centers with robust regulatory oversight. UAE corporation tax rate currently stands at 0%, in contrast to India’s 30% rate; Saudi Arabia’s 20%; Russia’s 15%; US’ 21%; China’s 25%; Germany’s 15%; and UK’s 19%. As a result, the number of family offices in the UAE increased nearly by almost double just from 2020 to 2021. The robust legal system and simple access to top-notch financial experts are further factors that attract the wealthy to flock towards the UAE.
What is a Family Office?
Family Office refers more to a concept encapsulating a variety of structures established to manage family wealth, and in each case, a bespoke solution should be applied. The core activities of a family office arrangement involve the centralized management of wealth derived from one or more families. Nuances arise with distinctions in the decision-making hierarchy and how influence is distributed throughout the family structure. Often these family structures will have a broad range of business interests, with management responsibilities and ownership entitlement spread across multiple family members, which can make them complex.
Single Family Office (SFO)
For families to centralise functions to manage their family wealth and business interests, family office is the most flexible and efficient investment vehicle. There is not a single structure for a single-family office. It is more a concept encompassing a variety of entities combined in a bespoke way to manage family assets in a centralised manner with a common target. The distinction resides in the governance mechanism, its decision-making hierarchy & management responsibilities to distribute and maintain the influence throughout the family structure and its ownership entitlements spread across family members. UAE financial free zones (ADGM & DIFC), like in the UK, offer a platform with a range of regulations and products to provide sufficient management flexibility to meet the varied and unique requirements of each family office. In this respect to enhance the wealth management and asset protection of the affairs & entities of a family, a SFO could be established.
The entity, a company limited by shares ultimately and exclusively owned by single family members, has as sole object to manage the assets and affairs of one single Family. It is not used as a holding structure but as a management structure that will monitor and manage the various entities and assets belonging to the same family. This entity could be established in DMCC, ADGM, DIFC and RAK.
Multiple Family Office (MFO)
Multiple Family Offices are often larger family offices that supports multiple families to manage their entire wealth. Multi-family offices services include tax and estate planning, risk management, objective financial counsel, trusteeship, lifestyle management, coordination of professionals, investment advice, and philanthropic foundation management, managing household staff and making travel arrangements. A multi-family office (MFO) is established as a commercial enterprise to meet the investment, estate planning and, in some cases, the lifestyle and tax service needs of affluent families. They involve a greater number of staff and an evolving client base and may also offer a much more dynamic structure.
As the UAE, continues to introduce new regulations, measures and initiatives that have drawn the major global players to its shores, here are a number of reasons why the UAE is the premier destination for family offices:
1. The UAE has a very supportive environment for businesses and has legislations that protect the interest of family-owned businesses
2. The presence of two main onshore financial centers; the Dubai International Financial Centre (DIFC), a financial free zone in Dubai, and Abu Dhabi Global Market (ADGM) where Family Business and Private Wealth Structures can be set up and thrive.
3. Access to diverse structuring options as the UAE provides access to civil law and common law solutions, utilizising a variety of vehicles, including trusts, foundations, holding companies and family office structures.
4. Ease of doing business and investment
5. Eligibility for the coveted UAE Long Term Residence Visas
6. The recent amendments to the UAE’s personal status law allows for expatriates to apply the laws of their home country in relation to inheritance of their UAE estate, so that the distribution of an individual’s estate will take place according to the laws of the country of which the individual is a citizen, instead of the application of UAE law based on Sharia principles.
7. A new family court in the nation’s capital of Abu Dhabi, which permits tourists and residents; non-Muslims and Muslims from countries that do not apply sharia law civil marriage to apply for a no-fault divorce and shared custody of children.
8. 100% foreign ownership permitted across numerous sectors and industries and an array of free zone jurisdictions.
9. A very attractive 0% tax regime with zero income, capital gain and inheritance tax and zero corporate tax in certain free zones. Large network of double tax agreements (DTAs).
10. Access to world-class educational models and healthcare system
11. State of the art infrastructure and the benefit of a Geographical location that facilitates travel links between key regions.
12. No public register of Directors and Shareholders and Corporate Shareholders are allowed.
Family Offices in UAE: Looking Ahead into 2023
The increase in family office migration to the UAE will only continue to grow as the UAE strengthens its commitment to support family businesses by providing the necessary legislative, structural and regulatory environment to ensure the success. With this in mind, Family Offices must then ensure that the concentration of private wealth is stewarded successfully, and that they seek the right guidance related to the acquisition, governance, risk management and preservation of their businesses and wealth through the generations. UAE financial free zones (ADGM & DIFC), offer a platform with a range of regulations and products to provide sufficient management flexibility to meet the varied and unique requirements of each family office. In this respect to enhance the wealth management and asset protection of the affairs & entities of a family, a Single-Family Office or Multi Family Offices could be established.
Family Offices in UAE: How can Wincore Advisory Group help?
|In setting up relevant structures for UHNWFs, the considerations will vary from family to family and so a number of factors will need to be considered in order to choose the right structure. Wincore Advisory Group continues to advise and implement tailor-made solutions to enhance and preserve the private wealth, family business holdings, family offices and HNW/UHNW clients As we continue to witness an increase in the number of our clientele who are looking to implement robust and flexible structures for their Family Assets and Wealth Protection, Wincore has a dedicated Private Client and Family Business Team that helps families to articulate their objectives and principles to establish the foundation of a sound and efficient family and business governance, that in turn acts to defend family assets from risks and provide a pathway to successful intergenerational wealth transfer.
Our Family Office Services include: