UAE Law and Practice Contributed by: Yann Mrazek, Kath Zagatti, Hermione Harrison and Keerthi Voodimudi, M/HQ Corporate Services Ltd
8.2 Legal and Tax Considerations Unlike jurisdictions where estate or inheritance taxa- tion significantly influences structuring decisions, the UAE does not impose wealth transfer taxes. As a result, family business succession strategies are shaped primarily by company law, succession prin- ciples and established foundation and trust frame- works, with governance and control considerations prevailing over tax-driven optimisation. Succession law materially influences structuring deci- sions, particularly for Muslim business owners. Under Federal Decree-Law No 41 of 2024 on Personal Sta- tus, shares held personally at death form part of the estate and are distributed among statutory heirs in accordance with Sharia-based inheritance rules. In closely held companies, this may result in fragmenta- tion of ownership and potential operational instabil- ity. To mitigate this risk, lifetime restructuring is often undertaken. This may include the consolidation of business interests within holding structures combined with planned distributions, or the transfer of shares to foundations or trusts where appropriate, in order to preserve continuity while remaining compliant with mandatory succession principles. The federal corporate taxation has introduced further considerations, particularly in relation to group reor- ganisations, intra-group transfers and holding com- pany arrangements. While corporate tax does not directly affect inheritance, it may influence the timing and mechanics of restructuring undertaken in antici- pation of succession. Where business interests, assets or beneficiaries have cross-border connections, foreign tax regimes – including estate, inheritance or capital gains taxes – may materially affect planning. In such circumstances, UAE-based structuring must be co-ordinated with for- eign tax advice to ensure efficiency and compliance. Overall, the UAE legal framework encourages pro- active and structured succession planning for fam- ily businesses, with emphasis placed on enforceable governance arrangements, preservation of control and long-term operational stability.
administrative and regulatory burden associated with transferring multiple assets individually. Foundations are frequently used to centralise owner- ship of shares and embed governance structures. By placing shares within a foundation, legal ownership and voting control vest in the foundation and are exer- cised through its governing body (the Council), while economic benefits are distributed to designated ben- eficiaries. Such structures are not universally adopted; many founders prefer to retain direct control during their lifetime, with foundation arrangements imple- mented as part of longer-term transition planning. Foundations enable rules on leadership succession, reserved powers, distribution policies and dispute resolution to be formally embedded within their gov- erning documents. Family constitutions and shareholder agreements also play a significant role. These instruments com- monly regulate decision-making authority, dividend policies, transfer restrictions and dispute resolution mechanisms. Transfer restrictions are often included to prevent the disposal of core business interests out- side the family and to preserve long-term ownership stability. Insurance planning is used primarily as a liquid- ity tool. Proceeds may fund buy-out arrangements among shareholders, facilitate equitable distributions where only certain heirs assume operational control, or prevent the forced sale of business assets to sat- isfy inheritance entitlements. While insurance forms part of broader succession planning, within a family business it is typically used to safeguard operational continuity. In addition to traditional holding companies, newer vehicles such as variable capital companies (VCCs) under DIFC regulations may be used where families seek flexible pooled holding structures with dynamic capital features. While VCCs do not replace founda- tional or trust structures in succession planning, they can provide an efficient platform for holding diversified family investments alongside core operating interests.
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