If a foreigner owns property in Dubai and passes away without a will, the lclaws of their home country may not apply to their assets. Instead, Shari’ah law may apply.

Notably, the UAE is not a common law jurisdiction, so unlike the UK, court decisions are not binding on future decisions the courts make. All court decisions are purely discretionary. The Government of Dubai’s official website states that ‘the UAE Courts will adhere to Sharia law in situation where there is no will in place’.

This means that if you die without a will or a succession plan, the local courts will examine your estate and distribute it according to Sharia law. All personal assets of the deceased, including bank accounts, will be frozen until liabilities have been discharged Even shared assets will be frozen until the issue of inheritance is determined by the local courts. There is also no automatic transfer of shares where businesses are concerned.

By structuring your property into an offshore company, you ensure that Shari’ah law will not apply to your assets and those lengthy probate proceedings are avoided.

As corporate entities do not fall under the personal status law, there would no issue of Sharia law applying.

As mentioned above, the only type of offshore company permitted to own property in Dubai is one which is incorporated through JAFZA. Commonly, the shares of the JAFZA offshore company are strategically held by another offshore company (to avoid Sharia-based inheritance law from applying to the individual shareholders of the JAFZA company), which is then often incorporated in a jurisdiction such as the BVI, which is subject to common law provisions, thus simplifying the inheritance procedures significantly.

Once the foreign national passes away, the shares of the JAFZA offshore company held by another offshore entity that is BVI can be transmitted in accordance with what laws will apply. Importantly, however, the Personal Status Law will not apply to the shares. It should be noted however that in the case of Muslim shareholders, the laws of the individual’s nationality may prevail and Sharia may still be applied.

Final Word

It’s important to be aware of the legal environment of the country where you are investing. Consulting a financial consultant or a lawyer who are familiar with the ins and outs of investing in UAE can help prevent legal complications.