The introduction of a new regime for the establishment of so called ‘intermediate special purpose vehicles’ (“Intermediate SPVs”) in the DIFC was approved by the Dubai International Financial Centre (“DIFC”) Authority on 19 September 2016, with immediate effect. This new regime – which relaxes some of the requirements normally applicable to the establishment and maintenance of DIFC limited companies and limited liability companies – is only available to entities that already have a substantive presence in the DIFC (i.e., entities that are incorporated or licensed in the DIFC and already have a physical office presence in the DIFC free zone).

The Intermediate SPV regime has been principally designed to meet the need of market participants to structure their downstream investments from the DIFC in a more time- and cost-efficient manner than was possible previously. Consequently, it is expected to be of most interest to funds, private equity houses, single family offices and other investment-related corporates, but it may have broader appeal.

The Intermediate SPV regime will complement the DIFC’s existing Special Purpose Company (“SPC”) regime, which has experienced an increased popularity in the market but is designed to have a restricted application to only structured financing transactions (such as Sukuk issuances). The Intermediate SPV regime will provide another option for the structuring of investments from the DIFC, in particular where no financing is involved.

It should be noted that it is contemplated that the Intermediate SPV regime will be codified in the new versions of the DIFC Companies Law and DIFC Companies Regulations, which are currently undergoing revision. However, as an interim measure pending the completion of the legislative review, the Intermediate SPV regime was given immediate force by the DIFC Authority by way of a waiver and amendment of certain provisions in the existing DIFC Companies Regulations and DIFC Operating Regulations.

Intermediate SPVs – Key Features and Benefits

Intermediate SPVs enjoy an expedited and less expensive application process when compared to typical DIFC limited companies and limited liability companies, including shorter and simpler application forms and generally a less complex application process. For example, the requirements for the business plan that is to be submitted alongside the application form are significantly condensed. Furthermore, where an applicant is seeking to apply for more than one Intermediate SPV, whilst separate application forms are required, a single business plan will suffice so long as the Intermediate SPVs form part of the same overall investment structure. However, the business plan will have to include a number of regulatory confirmations with respect to the Intermediate SPV, including that it will be used for a fund or a holding vehicle, or for proprietary investment purposes, and that no other business will be undertaken.

Fees are also significantly reduced with the registration fee for an Intermediate SPV currently set at US$1,000 (as opposed to the US$20,000 in aggregate that would otherwise be payable) and the annual licensing fee at US$3,000 (instead of US$12,000). Perhaps the most important change from a cost perspective is that applicants will be able to use their existing presence in the DIFC as the registered office of the Intermediate SPV and will not be required to enter into a new lease or acquire additional office space in connection with the establishment and operation of an Intermediate SPV.

It should also be noted that Intermediate SPVs cannot be used as the primary holding entity at the very top of a corporate structure nor as an actual operating entity at the bottom of the chain (hence the use of the term ‘intermediate’).

By virtue of being incorporated in the DIFC, an Intermediate SPV offers a number of key benefits enjoyed by other types of DIFC entities, including:

  • Tax neutrality. There are no corporate, transfer, withholding, capital gains, inheritance or other taxes under DIFC law and no stamp duty is payable in the DIFC on the transfer of shares in a DIFC entity.
  • No foreign ownership restrictions. Companies incorporated in the DIFC, including Intermediate SPVs, are not subject to the foreign ownership restrictions imposed by the UAE Companies Law and can therefore be 100% owned by foreign (i.e., non-UAE) shareholders.
  • UAE status. A company that is incorporated in the DIFC and is wholly-owned by UAE nationals (or by an entity that is 100% owned by UAE nationals) is treated as a “national company” for onshore purposes within the UAE. It is therefore likely that Intermediate SPVs could be used for the structuring of complex transactions involving onshore UAE assets.
  • Limited liability of shareholders. The liability of shareholders in a DIFC company is generally limited to the amount of their commitment to the company’s share capital. As such, Intermediate SPVs should be an effective tool to allow market participants to ring-fence their exposure to specific investments in a cost-efficient manner.
  • Application of DIFC Law. An Intermediate SPV benefits from being incorporated within the DIFC’s robust regulatory and legal system, where English is the primary language. DIFC corporate law is largely based on English common law principles and the DIFC Courts operate a system of binding precedent based on common law. Investors using Intermediate SPVs will also able to benefit from the DIFC’s advanced regime for the registration, perfection and enforcement of security interests.

It is, however, unclear at this stage whether Intermediate SPVs will meet the necessary minimum substance requirements and therefore be eligible to apply for a Tax Residency Certificate from the UAE Ministry of Finance to benefit from the UAE’s double tax treaty network – if they did, it would be a significant advantage over SPCs (which are currently not eligible for tax treaty benefits in the UAE).

Qualifying Applicants:

One of the main limitations of the Intermediate SPV regime is that it is currently available only to applicants who have an established presence in the DIFC – the DIFC Authority having clearly indicated that they do not wish to replicate the brass plate approach of certain offshore centers. Furthermore, at present, the establishment of Intermediate SPVs is limited to the following categories of Qualifying Applicants:

- collective investment schemes established in the DIFC and regulated by the Dubai Financial Services Authority (“DFSA”);

- collective investment schemes established outside the DIFC but managed by a fund or asset manager licenced by the DFSA; and

- holding companies or other holding entities, proprietary investment vehicles (whether incorporated or un-incorporated) and single family offices already having a presence in the DIFC.


The Intermediate SPV regime is a welcome business-friendly evolution in response to a market need - the simplified application process, the competitive fees and the ability to use a Qualifying Applicant’s existing presence in the DIFC are intended to strengthen the DIFC’s reputation as an attractive place to do business in light of other options currently available globally. Even if only available to such participants who are already established in the DIFC, we anticipate that the Intermediate SPV as a corporate vehicle will be an attractive alternative to established SPV domiciles, including offshore venues, particularly for transactions focused on the Middle East, Saudi Arabia in particular.