Property Gifting: Individual to Corporation

Within the UAE jurisdiction, one course of action that has gained tremendous popularity in recent times is what is known as a “Hiba Transfer”, also referred to as Property Gifting.

In Dubai, a Hiba transfer is perhaps most often carried out in cases involving ownership transfers from an individual to another individual (with the main criteria set by Dubai Land Department being that such transfers can only take place between 1^st degree relatives) however it is also possible for a Hiba transfer to be made from an individual to a corporate entity (or vice versa). One of the main reasons behind this is commonly due to inheritance planning. Property Inheritance matters can be a tricky subject especially for someone who is not completely familiar with UAE legalization and/or Sharia Law. “This way, the property can be transferred into the ownership of a company within or outside of the UAE, and thereby curbing any limitations in local inheritance laws. The company’s shareholders are the individuals who formerly owned the property, and therefore, they continue to indirectly own the property through an entity outside of the UAE.  This type of ownership structure allows existing owners to continue to exercise control, and effectively ownership, of their properties in the UAE” (Wills UAE). Company transfers are especially effective for those looking to setting up a permanent estate-planning scheme for future generations, as children or spouses can continue to benefit from, and even transfer their future assets into the company as well.

In situations where the owners of a property wishes to maintain ownership of said property, there are even instances where a company is set up in order for the transfer to take place. It is worth noting that there are only certain corporate structures that are currently authorized by the Dubai Land Department to hold properties under a corporate structure. The most common is the JAFZA Offshore but others are also gaining more traction, including those within the DMCC and DIFC jurisdictions. It is however possible for the shareholders of such structures to be either individuals or other corporate entities (eg overseas companies such as those registered in the BVI).

In the case of Property Gifting to and from a company, it is important to remain mindful of such intricacies and adjustments that have to be made for a successful transfer to take place, as the implications are different than a transfer made from individual to individual. By definition, Property Gifting is the voluntary transfer of ownership of a property from one party to another and it can be carried out in full or part of the property in question. In the case of Gifting a property from person to company or vice versa, the percentage of the property that is being transferred must align with the percentage of ownership of the shareholder/s in question. Gift transfers for companies are certainly more complicated.  Fully attested and translated company documents must be presented and specific approvals are required from both the relevant jurisdiction and Dubai Land Department

Under current regulations, the title transfer of any real estate is accompanied by a stamp duty of 4% required by the Dubai Land Department to be paid upon any transfer of title. One of the key benefits of a Hiba transfer is that it is exempt from the bulk of this fee, thereby reducing the fee to a mere 0.125%, in accordance with the value of the property as determined by the Dubai Land Department (Read More).

The successful completion of a Hiba transfer, particularly in relation to corporate entities, requires a host of supporting documentation that can be easily taken care of with the help of a Power of Attorney specialist, especially in instances where all parties cannot be physically present in the UAE. Hiba transfers are best examined on a case-by-case basis and there are instances where more than one Hiba transfer needs to take place in order for an individual to reach the desired result. Interested in finding out more? Don’t hesitate to reach out to one of our specialists today at info@yourpoadubai.com or call +971 4 338 3032 or read the last blog post we wrote regarding property gifting here.