23 Mar How the UAE came to be an ideal wealth jurisdiction
‘Offshore’ refers to any activity or entity that is located outside the jurisdiction or territory where an individual or business is based. The term has become synonymous with the banking and finance sectors, particularly in the context of offshore wealth management.
Over the years, offshore wealth jurisdictions have become increasingly popular as a way for high-net-worth individuals (HNWI’s) and families to protect their assets, implement succession planning strategies and minimise tax liability while retaining a high level of confidentiality and privacy.
Though typically used by HNWI’s and multinational corporations, offshore jurisdictions can benefit a range of individuals and entities looking for wealth preservation and estate planning solutions that reduce their tax burden and provide more favourable regulatory regimes than are available in their home country. They also offer access to a wider range of banking and investment management services and the potential to explore commercial opportunities in other international markets.
How do offshore jurisdictions favour wealth management?
One of the primary benefits of using offshore jurisdictions for wealth management is the tax incentives they provide. Offshore jurisdictions generally offer reduced tax liabilities or tax exemptions which maximise profitability and provide greater return on investment.
Asset protection and confidentiality are also a big motive for investors choosing to move their wealth offshore. The legal structures used can help investors to protect their assets from creditors or legal judgements and allow for a greater level of confidentiality than is possible with onshore registered entities. Being able to keep financial affairs private reduces exposure to legal or regulatory risks and also allows companies to protect their competitive advantage by keeping proprietary information confidential.
The desire for greater portfolio diversification is another reason for considering offshore investment. By gaining access to international markets and multiple currencies and investment products, investors can better manage risk. Spreading investments across different asset classes, sectors and regions reduces the impact of any one investment on the overall portfolio and provides more stability for investors with a lower risk tolerance.
The UAE’s growing reputation in the financial services sector
When asked to name the most prominent wealth management centres around the world, countries such as Switzerland, Singapore, Hong Kong or the UK may be the first that spring to mind, but the UAE is growing in stature and is fast emerging as one of the foremost global destinations for wealth management and private banking globally and a viable alternative to other more established markets.
Its privileged geographic location, stable economy and favourable tax regime attracted a record net inflow of 5,200 millionaires in 2022 and as the appeal of traditional wealth centres begins to wane, the UAE’s progressive economic policies and business-friendly landscape continue to attract to investors in their droves.
The UAE is the largest wealth management centre in the GCC region with around 83,000 millionaires resident in the country and assets under management of approximately USD 110 billion.
Most of these residents are expatriates who have a more global outlook and are more open to the idea of holding assets offshore. By having the confidence to transfer their wealth offshore, these investors are able to diversify their investment portfolio and reduce their exposure to any single country’s economy or currency, providing an effective hedge against currency fluctuations and relief from high tax rates in their home countries.
Financial free zones such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) have also been instrumental in increasing foreign investment flows.
With over 2,700 companies present in DIFC, including international banks, law firms, insurance companies and fintech providers, the centre provides the perfect environment to serve family offices, HNWI’s and private wealth in general. It is also serves as an ideal base to access the growing economies of Asia, Africa and the Middle East, and benefit from opportunities opening up in these regions.
Its strong focus on innovation with initiatives such as FinTech Hive, ADGM RegLab with partnership with Hub71 and DIFC Innovation Hub have also furthered the UAE’s aspirations of becoming a leading technology hub and created great opportunities for investment in emerging financial sector industries.
Forward thinking policies
One of the major attributes of the UAE’s legal system is its ability to adapt. Being able to enact new federal laws quickly differentiates it from other countries with greater bureaucracy and slower legal systems and has enabled it to respond to market demands quickly and drive greater economic growth.
Recent developments such as the easing of foreign ownership restrictions and the implementation of numerous long-term visa programmes have enhanced the country’s business environment and made it a much more attractive investment destination. The establishment of free zones have also played an important role in strengthening the country’s economic appeal.
There are now over 40 free zones across the country, all offering 100% foreign ownership, simple business registration processes with the minimum of bureaucracy and significant financial incentives such as exemption from corporate tax and customs duties, and no restrictions on capital and profit repatriation.
Assuredness in the face of global instability
Despite increasing economic and political volatility around the world, the UAE has managed to remain remarkably resilient.
Many HNWI’s have been drawn to the UAE for its political and economic stability and robust regulatory framework. Global events like Covid-19 and geopolitical instability in other parts of the world have led investors to seek out more secure investment opportunities and the UAE’s effective handling of the pandemic and rapid rollout of its vaccination programme helped to mitigate the effects of the global economic downturn and instill confidence amongst investors.
How to invest in a UAE offshore jurisdiction
The most prominent offshore jurisdictions across the UAE are DIFC, ADGM and RAKICC. These jurisdictions offer a wide range of wealth management vehicles from investment companies and trusts to private funds and family offices.
Choosing the most appropriate wealth management vehicle depends on various factors, such as your financial goals, tax situation, and risk tolerance. It’s therefore important to consult with a reputable financial services company with experience of the local market before making any decision.
How can Huriya Private Help?
Huriya Private has over 20 years of experience in the domain of corporate structuring. We have unparalleled knowledge of business practices and legal requirements in the UAE as well as an international network of contacts and a deep understanding of the needs of modern-day high net worth clients and international businesses.
We can guide advise you on a wide range of offshore wealth structuring solutions and help you manage your wealth in the most commercially sound and tax efficient manner. We provide an end-to-end service to ensure that you have access to all the information you need and are fully compliant with all existing laws and regulations. If you need help with this or any other immigration, financial or corporate structuring issue, please don’t hesitate to contact us on email@example.com and we will be happy to help.