In a departure from traditional tax havens, such as the Cayman Islands and Switzerland, Abu Dhabi is gaining popularity among the world’s wealthiest individuals as a preferred destination to safeguard their assets.
High-profile figures like cryptocurrency’s wealthiest individual Zhao Changpeng, India’s Adani family, hedge fund magnate Ray Dalio, and Russian steel tycoon Vladimir Lisin have established special purpose vehicles (SPVs) in Abu Dhabi’s international financial center, according to a review of corporate filings in the United Arab Emirates by Bloomberg News.
The number of SPVs in Abu Dhabi Global Market (ADGM) has surged from 46 in 2016 to over 5,000, reflecting a broader global trend in how the world’s affluent are securing their wealth. While the specifics of asset relocation, reasons behind the move, and the contents of each SPV remain undisclosed, the influx of wealth underscores a shift in global wealth protection strategies.
Special purpose vehicles, pioneered by junk-bond king Michael Milken in the late 1980s, have become favored structures for high-net-worth individuals aiming to mitigate financial risks by establishing separate legal entities. Abu Dhabi’s SPVs, serving as holding companies managing wealth, reportedly encompass assets such as property and equity.
This trend not only signifies a new role for Abu Dhabi’s US$509 billion economy but also aligns with the Al Nahyan family’s efforts to diversify the emirate’s economy away from its dependency on oil. Concurrently, Abu Dhabi’s rise comes as low-tax jurisdictions like the British Virgin Islands and the Cayman Islands face increased scrutiny and experience a decline in new corporate registrations.
Abu Dhabi is gaining favor among high-net-worth individuals as a prominent destination for safeguarding assets, attributed to its effective measures to ring-fence assets from foreign jurisdictions and capitalize on the UAE’s extensive double tax treaty network, according to insiders familiar with the matter.
The UAE’s double tax treaty proves advantageous for affluent individuals seeking to minimize tax liabilities for companies within special purpose vehicles (SPVs), contingent on agreements between the Gulf state and additional countries where they conduct business.
Wealth advisers and international investors, many of whom spoke anonymously, highlight several benefits offered by the emirate. Abu Dhabi and neighboring Dubai have evolved into thriving global cities, offering incentives such as long-term residency and, in some cases, UAE passports for substantial investments.
The emirate boasts sovereign wealth funds controlling over US$1 trillion in assets, along with influential private investment firms. Additionally, in recent years, the UAE has served as a haven for individuals navigating regulatory challenges overseas.
Prominent figures, such as Zhao Changpeng, the former CEO of Binance, have established multiple SPVs in Abu Dhabi, taking advantage of its pro-crypto policies. Despite facing legal challenges, including a guilty plea for anti-money laundering and sanctions violations, Zhao has demonstrated confidence in the emirate.
Abu Dhabi’s international financial free zone, inaugurated in 2015, has grown in attractiveness due to the UAE’s strategic decisions, such as refraining from sanctioning countries like Russia, while other nations like the US, Britain, and the European Union increased restrictions.
Notably, subsidiaries of Royal Group, under the control of National Security Adviser Sheikh Tahnoon bin Zayed Al Nahyan, the UAE President’s brother, have established several ADGM SPVs in the latter half of the year, affirming Abu Dhabi’s growing support, even from influential royals.
Abu Dhabi’s success in attracting more SPVs is further fueled by the strategic utilization of its golden visa and passport programs over the past couple of years, encouraging the wealthy to establish a more permanent residence in the Gulf state, as noted by Armand Arton, the founder of citizenship firm Arton Capital.
“We see this trend of more billionaires moving to the country,” said Mr Arton.
“Once they feel welcome and safe, they then look to relocate their businesses and assets, with ADGM being one of the preferred places.”