In Dubai, the most common scenarios for a Hiba transfer involve the transfer of ownership from one individual to another in compliance with the regulations set forth by the Dubai Land Department. These transfers are typically limited to immediate family members. However, it’s worth noting that a Hiba transfer between an individual and a corporate entity, or vice versa, is also a viable option. When you’re considering transferring property from an individual to a corporation in the United Arab Emirates (UAE), there are important factors to keep in mind.
This article is designed to guide you through the process of transferring your property to a business in the UAE, often referred to as “property gifting.” Whether you’re an individual looking to transfer your property to a corporation or a startup seeking to specialize in property management for clients, this article is for you.
What is property gifting?
In the UAE, property gifting involves changing the name on a title deed to transfer ownership of the property to another individual or entity. The primary objective is to protect the property from regional inheritance laws. Property gifting can be directed towards offshore companies or family members. It constitutes the voluntary transfer of property ownership from one person to another, either in full or in part.
How do I transfer property from an individual to a company in the United Arab Emirates?
If you’ve ever visited an Islamic nation, you may be familiar with the concept of a “Hiba Transfer.” In essence, a Hiba transfer is a gift given by one person to another, typically a first-degree relative. However, it’s also possible to extend this gesture to a corporate entity, and vice versa. There are various reasons for entrusting property to a corporation, such as inheritance planning or efficient property management, to ensure that future generations can benefit from the assets. If you’re not well-versed in UAE Sharia law, navigating property inheritance can be quite challenging.
Permissible Corporate Entities for Property Ownership in the UAE
It’s important to note that not all business entities have the authority to possess property in the UAE. The Dubai Land Department exclusively permits specific corporate forms to hold properties within a corporate framework. The JAFZA offshore structure is the most popular choice, although others, such as those falling under the DMCC and DIFC jurisdictions, are also gaining popularity. However, it’s worth mentioning that shareholders of such structures can be either individuals or other business entities, including overseas companies registered offshore.
The Advantages of Transferring Property to a Dubai-based Company
1. Inheritance Planning
One of the primary motivations for property transfers is inheritance planning. Dealing with property inheritance matters can be complex, particularly for those unfamiliar with Sharia law or UAE legal regulations. Transferring property ownership to a corporation, whether located within or outside the UAE, can circumvent any restrictions imposed by local inheritance laws. In this arrangement, the former property owners still indirectly retain ownership through their shares in the company, even if it is registered outside the United Arab Emirates.
2. Retaining Ownership and Control
Another notable advantage of transferring property to a Dubai-based company is the ability for existing owners to maintain control and legal ownership of their properties in the UAE.
3. Long-term Estate Planning
For those interested in long-term estate planning, company transfers offer an effective strategy for securing future generations’ interests. This approach enables children or spouses to continue benefiting from and potentially transferring their assets into the company for future planning purposes.
When gifting property to a company in Dubai, it’s essential to consider the following key points:
1. Ownership Verification: To proceed with the property gift, you must possess the original title deed as proof of ownership. Keep in mind that mortgaged and off-plan properties cannot be gifted.
2. Shareholders’ Ownership: The property transfer should align with the ownership percentage of the shareholders involved.
You may also read Procedure for Applying for Registration of Gifted Property in the UAE
3. Necessary Permits: Gifting property to a company involves specific permit requirements from the relevant jurisdiction and the Dubai Land Department. All company documents must be provided with attested translations.
4. Stamp Duty: The Dubai Land Department imposes a 4% stamp duty on property transfers. However, a Hiba transfer is exempt from most of this cost, reducing the fee to just 0.125% based on the property’s valuation determined by the Dubai Land Department. This is a significant advantage of opting for a Hiba transfer.
5. Process Considerations: Successful execution of a Hiba transfer requires careful attention to the aforementioned factors. If the parties involved are not present in the UAE during the transaction, you can engage a power of attorney professional to facilitate the process. Multiple transfers may complicate the procedure.
6. Legal Consultation: Ga registered Lawyers and Legal Consultants possess extensive experience in advising clients on property gifting to companies in Dubai. The “Gift Transfer” procedure offered by the Dubai Land Department is commonly used in Dubai for various purposes, including succession planning, tax structuring, and inheritance, especially in light of the prevalence of Sharia Law in the region.