Saudi Arabia does not have a specific trust law, however, the Sharia provides for the creation of waqfs, which are the equivalent of charitable trusts or endowments. As such, if you want to set up a trust in Saudi Arabia, you can choose between a waqf or other similar entities, among which are foundations and associations.
Below, our Saudi company formation agents explain how to select and create an estate planning structure. You can rely on us for support in setting up the chosen entity.
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Similarities between trusts and waqfs in Saudi Arabia
Just like the trust, the Saudi waqf can be used as an estate or inheritance tool. Also, the two entities resemble in terms of parties involved in them, namely:
- They must both have a settlor;
- They are also required to appoint a third-party to administer the assets;
- The settlor can decide who the beneficiary of those assets are;
- The settlor establishes the assets to be left in trust.
When it comes to trusts, they are often created by natural persons with the purpose of ensuring their assets are left to the beneficiaries they choose. From this perspective, those who want to set up trusts in Saudi Arabia must opt for the waqf al-Dhurri. It is created through a donation deed where the assets are left to the next of kin of the settlor.
Our lawyers in Saudi Arabia are at the service of foreign citizens who live here and want to establish trusts in accordance with the local rules.
How to create the equivalent of a trust in Saudi Arabia
Those who want to set up waqfs in Saudi Arabia must draw up an establishment deed through which the settlor:
- appoints the asset manager;
- specifies the assets to be left in the care of the estate manager;
- nominates the beneficiary or beneficiaries.
It must be noted that waqfs in Saudi Arabia are used to promote charity. Also, compared to traditional trusts, they are irrevocable and perpetual. This means that once created, settlors cannot change their mind. Also, the estate will be transferred to the asset manager.
Feel free to address any questions you may have about this structure to our Saudi lawyers.
International trusts in Saudi Arabia
Saudi citizens and residentsinterested in the creation of traditional trusts based on English law can set up international or offshore trusts. They can be settled in various jurisdictions, however, they must also consider the inheritance regulations applicable in Saudi Arabia.
Our Saudi lawyers can offer advice on the inheritance laws applicable here.
Alternatives to trusts in Saudi Arabia
Apart from the waqf, Saudi citizens and residents can also use the following estate planning tools as alternatives to trusts:
- wills,
- foundations.
Our company formation consultants in Saudi Arabia can assist with the creation of foundations here.
Why choose Saudi Arabia for estate planning purposes?
No matter if you decide on a Saudi waqf or international trust, it is useful to note that Saudi Arabia does not impose inheritance taxes, which is a great advantage for those who have Saudi-based real estate, for example.
In the case of foreigners who are residents, specific taxes may be imposed in their home countries. As such, they can rely on our accountants in Saudi Arabia for consultancy on taxation.
Taxation of individuals in Saudi Arabia
Saudi citizens are not subject to income levies, which is why obtaining Saudi residency can be a good option for foreigners interested in reducing their taxes. To be considered residents for tax purposes, they must:
- spend at least 30 days per year in the country if they have a permanent home in KSA;
- reside at least 183 days per year in KSA.
If you want to set up the equivalent of a trust in Saudi Arabia, please contact us for assistance.