SPV companies are widely used in international business. The UAE, especially several free zones, is an attractive place to set them up. This is due to tax benefits and flexible corporate rules. The exact process and requirements vary by free zone. In this article, we outline the key features of each option.
- SPVs provide risk management by safeguarding parent company assets from liabilities and legal claims.
- UAE free zones offer favourable business conditions that attract SPV registration.
- SPVs facilitate tax efficiency, which can achieve a 0% corporate tax rate on qualifying income.
- Common features across free zones include asset ring-fencing and no requirement for a physical office.
What is an SPV company?
SPV stands for Special Purpose Vehicle. It is a company created for a specific purpose. An SPV is usually a separate subsidiary. It helps protect the parent company from financial risks.
Typical reasons to set up an SPV include:
- Risk management and ring‑fencing of parent company assets
- Protecting parent company assets from creditors and other legal claims
- Achieving tax efficiency under local tax law
- Attracting investors to finance specific projects
An SPV can hold real estate or intellectual property. It can also act as a holding company. Shares in the SPV can be transferred into a trust. SPVs are also used to diversify investment portfolios. They can issue securities to raise finance.
Why SPVs are popular in the UAE
SPVs are popular in the UAE because of:
- Favourable business and tax conditions
- A reliable legal system
- A strategic location with access to global markets
- Government support for foreign investment
- Strong and fast economic growth
Depending on where you plan to operate, you can register a company in the UAE in the following jurisdictions:
- The UAE mainland
- UAE free zones
- UAE offshore jurisdictions
SPV companies can be set up in several free zones. The most popular are:
- Dubai International Financial Centre (DIFC)
- Abu Dhabi Global Market (ADGM)
- Dubai Multi Commodities Centre (DMCC)
Below we outline the key rules and features of SPVs in these free zones.
SPV companies in DIFC
In DIFC, special purpose vehicles are registered as “Prescribed Companies”. This structure ring‑fences assets and liabilities from various risks. It can be used as a holding company.
Under the current DIFC Prescribed Companies Regulations, to register an SPV it is sufficient to meet any one of the criteria listed below.
Requirements for controlling persons
Individuals who may act as controlling persons for an SPV company must fall into the following categories:
| Controlling person | Definition |
|---|---|
|
Person with a connection to the member states of the Gulf Cooperation Council (GCC) |
Such persons may include:
|
|
Registered person |
A legal entity incorporated or registered in the DIFC in a legal form permitted by law. |
|
Authorised firm |
A person that holds a licence from the Dubai Financial Services Authority (DFSA) or from another recognised financial regulator. |
Requirements for controlling persons are only one of the conditions for registering an SPV company in the DIFC. If the other conditions set out below are met, any person may act as a controlling person, including a natural person who is a non‑resident of the UAE.
Objectives for establishing an SPV company
An SPV company in the DIFC may be set up to:
- Hold one or more assets registered with the competent authorities of GCC member states; or
- Exercise control over such assets.
These assets include, in particular:
- Plots of land and real estate
- Shares in private and public companies, or partnership interests
- Intellectual property
- Aircraft and sea‑going vessels
Alternatively, an SPV may be established for qualifying purposes set by law. These include, in particular:
- Operating aircraft and vessels;
- Holding intellectual property;
- Holding assets invested via crowdfunding platforms; and
- Participating in structured finance.
Holding the assets or pursuing the stated purposes must start within six months after the company obtains a licence as a Prescribed Company.
Note that the SPV purpose condition is not mandatory by itself. It may be chosen voluntarily or where other conditions cannot be met.
Corporate governance requirements
Finally, if there is no specific controlling person, assets, or purposes, an SPV company may still be registered, subject to governance requirements.
Specifically, a director of the company must be provided by a licensed corporate service provider. If there is more than one director, the corporate service provider must be one of them.
The founder and the controlling person of the company may be any person.
Other features of SPV companies in the DIFC
| Features | Explanations |
|---|---|
|
Incorporation procedure |
Before incorporation, you must obtain initial approval from the DIFC Registrar of Companies. The documents submitted with the application depend on the qualifying requirement the company meets. |
|
Registered office |
Although an SPV does not conduct commercial activity, it must have a registered office in the DIFC. This address can be provided by a licensed corporate service provider. |
|
Reporting |
The SPV must maintain records and file reports as required. |
|
Employees |
An SPV cannot have employees and therefore cannot sponsor work visas in the UAE. |
SPV companies in ADGM
ADGM SPV companies can be used for many purposes, including setting up subsidiaries or joint ventures. An ADGM SPV is a separate legal entity. It ring‑fences financial and legal risks from the assets and liabilities of its shareholders or its subsidiaries.
In ADGM, an SPV may be incorporated as a:
- Private Company Limited by Shares (Ltd); or
- Restricted Scope Company (RSC).
An RSC may be incorporated only as a subsidiary of certain qualifying companies. Its advantages include not publishing shareholder and director details on the public register, and no statutory audit of financial statements.
Nexus requirement
An important condition for setting up an SPV is having a nexus with ADGM, the UAE, or GCC member states. You can show this in several ways, for example by providing evidence that:
- the SPV’s shareholders or controlling persons are residents of the UAE or GCC member states.
- the SPV’s assets are located in the UAE or in a GCC member state.
- the SPV delivers real or economic benefit to the UAE, or facilitates UAE‑related transactions.
- the SPV’s securities are admitted to trading on a stock exchange in ADGM.
Other features of SPV companies in ADGM
| Features | Explanations |
|---|---|
|
Incorporation procedure |
Since 2021, ADGM SPV companies that do not have sufficient presence in the UAE in the form of local assets, staff, or turnover (non-exempt companies) must appoint a local licensed corporate service provider. Companies with sufficient presence (exempt companies) may incorporate and manage the SPV themselves. To incorporate an SPV, the application with the required documents is submitted electronically via the ADGM online portal. |
|
Registered office |
As an SPV does not carry on commercial activity, it does not need to lease an office. The company may use the address of a local corporate service provider as its registered office. Exempt companies may use the address of an existing affiliated entity registered in ADGM. However, engaging a local corporate service provider alone does not satisfy the nexus requirement. |
|
Reporting |
The SPV must maintain records and file reports as required. Certain exemptions apply to companies incorporated as a Restricted Scope Company. |
|
Employees |
An SPV does not have employees and therefore cannot sponsor work visas. |
SPV companies in DMCC
The SPV regime has been available in DMCC since 2024, following amendments to the DMCC Company Regulations. As in other jurisdictions, a DMCC SPV is a passive holding vehicle designed for specific purposes, such as:
- Holding and managing real estate
- Holding intellectual property
- Project financing
- Creating a structured investment instrument
DMCC SPVs follow the general company formation and licensing rules of DMCC, with some exceptions. SPVs in DMCC:
- Are exempt from the requirement to appoint a company secretary.
- May dispense with general meetings of shareholders.
- Are exempt from leasing a physical office in DMCC. However, they must have a registered office address, which may be provided by a local corporate service provider.
SPVs are most often incorporated as Limited Liability Companies (LLC). They can also be set up as companies limited by guarantee. In that case, the company has no share capital, and members’ liability is limited to the amount they undertake to contribute on winding up.
A DMCC SPV cannot carry on commercial activity or employ staff. Therefore, it cannot be used to obtain a UAE work visa.
Other advantages of registering SPV companies in the UAE
The UAE free zones mentioned above offer attractive SPV registration fees. For comparison:
| Free Zone | Fees |
|---|---|
|
DIFC |
|
|
ADGM |
|
|
DMCC |
The minimum cost of company registration will be AED 3,690. |
In addition to comparatively low registration costs, SPV companies can benefit from favourable tax treatment in UAE free zones. Subject to meeting the relevant conditions, they may qualify for a 0% corporate tax rate on qualifying income.
Conclusion
The UAE, especially DIFC, ADGM and DMCC, offers strong conditions for setting up and running SPV companies. Each free zone has its own rules, but common features include:
- SPVs allow ring‑fencing of assets and liabilities, reducing key financial and legal risks.
- SPVs do not conduct active commercial operations and do not employ staff.
- A physical office is not mandatory. A registered office address in the relevant free zone is usually sufficient.
