UAE Law and Practice Contributed by: Yann Mrazek, Kath Zagatti, Hermione Harrison and Keerthi Voodimudi, M/HQ Corporate Services Ltd
Taken together, these developments reflect the contin- ued evolution of the UAE’s wealth planning landscape. They enhance legal clarity and structural flexibility while reinforcing the importance of sound governance and forward-looking succession strategies. 10. Fiduciary Regulation, Standards and Taxation 10.1 Corporate and Professional Fiduciaries In the UAE, the regulation of corporate and profes- sional fiduciaries depends on the jurisdiction in which the trust is established and administered. Within the DIFC and ADGM, corporate trustees carry- ing on trust business by way of commercial activity are required to be licensed and regulated by the relevant financial services authority (the FSRA in the ADGM and the DFSA in the DIFC). Licensed trust service pro- viders are subject to regulatory supervision, capital adequacy requirements, compliance standards and ongoing reporting obligations. By contrast, private individuals acting as trustees in a non-commercial capacity are not typically subject to licensing require- ments. Commercial or professional trustees are held to a higher standard of care than non-professional trus- tees. Under common law principles applied in the DIFC and ADGM, professional fiduciaries are expect- ed to exercise the degree of skill and care reasonably expected of a professional trustee in that capacity. This may result in greater liability exposure compared to lay trustees, particularly in relation to investment decisions and fiduciary administration. Private trust companies (PTCs) and private trust foundations (PTFs) may be established in the UAE to act as trustee of a specific family trust or group of related trusts without carrying on trust business for the public. In such structures, the PTC or PTF itself serves as the trustee, while family members or trusted advisers may participate at the board or governance level. These vehicles are commonly used by high net worth families seeking greater influence over trustee decision-making while maintaining a formal corporate governance framework.
Unlike trustees, members of the Council of a DIFC, ADGM or RAK ICC foundation are not subject to stat- utory licensing requirements solely by virtue of serving on the Council. Their duties arise under the applicable foundation legislation and the foundation’s constitu- tional documents. However, where a council member is a corporate service provider carrying on regulated activities by way of business, licensing requirements may apply. In all cases, council members remain sub- ject to fiduciary duties of care and loyalty under the relevant foundation framework. 10.2 Taxation of Trusts A foreign trust may become subject to UAE Corporate Tax if it is “effectively managed and controlled” in the UAE. This can occur if the key decisions for the trust are made by trustees who are resident in the UAE. In such cases, the trust is treated as a resident taxable person and its worldwide income may be subject to CT (standard rates: 0% up to AED 375,000 and 9% above that threshold). However, most family trusts can apply to the Federal Tax Authority (FTA) to be treated as an unincorporated partnership (fiscally transparent) under Article 17 of the Corporate Tax Law. If this application is success- ful, the trust itself is not taxed; instead, any income is treated as belonging directly to the beneficiaries. This transparency is available if the trust is established for the benefit of individuals (or public charities), primarily manages assets and does not conduct a business that would be taxable if done by the beneficiaries directly. For trusts that do not have separate legal personality (unincorporated trusts), they are generally treated as tax-transparent by default. In these cases, while the trust itself is not a taxable entity, the UAE-resident trustee is responsible for meeting any tax registration or filing requirements on behalf of the trust. 11. Planning for Non-Traditional Families 11.1 Succession Rights and Estate Taxes for Non-Traditional Families The treatment of succession rights in the UAE depends primarily on the applicable personal status framework
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