private client advisory

In recent years, the United Arab Emirates have ceased to be perceived merely as a “business-friendly” jurisdiction. They are increasingly emerging as a legal laboratory of interest for international wealth planning. In this context, the UAE foundation deserves particular attention as a vehicle which, if properly structured, can offer robust governance and effective asset segregation.Since 2017, more than 2,200 foundations have been established across the three main UAE regimes — RAK ICC, ADGM and DIFC — with 848 new registrations recorded in 2025 alone. What is a UAE Foundation and how does it differ from a trust From a legal perspective, a RAK ICC foundation is a legal entity with its own separate legal personality, distinct from that of the founder and other involved parties. It is designed to hold and manage assets in accordance with the purposes set out in its charter and by-laws, within a long-term governance and succession framework. A foundation is not typically established to carry out commercial activities. The RAK ICC framework expressly provides that any such activities must be merely ancillary or incidental to its objectives. In practice, it can act as a central governance platform for family wealth, shareholdings, real estate, financial portfolios or philanthropic projects, without being confused with the underlying operating business. From an operational standpoint, the RAK ICC regime provides for: a minimum initial capital of USD 100 the appointment of a Registered Agent at least two Council Members the possibility to appoint a Guardian in certain cases a limited level of public disclosure restricted to essential registry data, with the remaining documentation kept confidential except where disclosure is required by competent authorities The 2025 RAK ICC Reforms: What Has Changed The amendments that came into force on 31 July 2025 represent a significant development. They move in the same direction as reforms already observed in the DIFC in 2024, confirming a broader trend toward convergence among UAE regimes and alignment with international private wealth planning standards. Enhanced cross-border protection (firewall provisions) RAK ICC has strengthened its firewall provisions: courts are not required to recognise or enforce foreign judgments that are inconsistent with the foundation regime. The same principle extends to founders, contributors, council members, guardians and qualified recipients. In particular, succession rights arising under foreign law in respect of assets of a living person are not recognised within the RAK ICC framework. Creditors: defined perimeter and three-year limitation period The new rules introduce a three-year limitation period to challenge the establishment of a foundation or the transfer of assets to it. More importantly, they clarify that, where claims are upheld, remedies are limited to the specific transferred asset — or its proceeds — and do not automatically affect the entire structure. This significantly improves clarity and manageability of risk exposure. Protection against coercion (duress) The amendments introduce explicit protection against requests, orders or pressures from parties acting under duress or pursuant to measures outside the competent jurisdiction. Foundation stakeholders are required to disregard demands or actions that are inconsistent with the powers conferred by the charter or by-laws. This provision reinforces the internal autonomy of the structure in distressed scenarios. Strengthened arbitration framework While RAK ICC continues to allow the choice between DIFC Courts and ADGM Courts, the 2025 reforms significantly enhance the role of arbitration. Arbitral tribunals are granted powers equivalent to those of courts in matters relating to the administration of the foundation, including representation of minors, unborn beneficiaries or unascertained persons. For complex family wealth structures, the advantage is not only procedural but also reputational. Clarification on assets held as trustee The 2025 reform further clarifies that assets held “on trust” by a foundation remain subject to the terms of the trust and do not form part of the foundation’s own assets. This is a technically important point for private trustee foundation structures. The UAE Tax Framework: Corporate Tax and Family Foundations The UAE federal tax framework has become more articulated and, in many respects, more transparent. The Federal Tax Authority has issued guidance on the taxation of Family Foundations, clarifying that a foundation may — subject to the conditions set out in Article 17(1) of the Corporate Tax Law — apply to be treated as an Unincorporated Partnership, i.e. as a fiscally transparent entity for UAE Corporate Tax purposes. If the application is approved, the foundation is not taxed at the entity level, and income, assets and liabilities are attributed to the beneficiaries in accordance with applicable rules. The main conditions include: the foundation must be established for identified or identifiable natural persons and/or public benefit entities its primary activity must consist of holding, investing, distributing or managing savings and investment assets it must not carry out activities that would constitute a commercial business if performed directly by an individual its principal purpose must not be the avoidance of Corporate Tax Foreign entities — including foundations, trusts or similar structures — with a presence or nexus in the UAE may also access the same treatment, subject to meeting the relevant requirements. The Italian Perspective: What Italian-Resident Clients Need to Consider This is the area where Italian clients must exercise particular care — and where the difference lies between a structure that is merely attractive on paper and one that is truly sustainable. Where the founder or beneficiaries of a UAE foundation are tax resident in Italy, a number of rules come into play which require an integrated analysis and cannot be overlooked: Tax monitoring (RW reporting): assets held through a foreign foundation may fall within reporting obligations, depending on the level of control and the nature of the underlying assets. IVAFE: the tax on foreign financial assets may apply, depending on how the foundation is classified under Italian law. Residence of founder and governing bodies: the location of decision-making functions may be relevant in determining the effective tax residence of the structure. Legislative Decree No. 139/2024: the recent reform of trust taxation in Italy introduces new criteria that, by analogy, may also influence the