“In April 2019, the UAE issued Cabinet of Ministers Resolution No. 31 concerning Economic Substance (“Resolution 31″) as part of its commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation.”
An economic substance test will require a licensee to demonstrate that the following are true: the licensee and the relevant activity are being directed and managed in the United Arab Emirates; the relevant Core Income Generating Activities (also known as “CIGAs”) are being carried out in the UAE; and the licensee has sufficient employees, premises, and expenditures in the United Arab Emirates.
The major use of the legislation is to make sure that most firms or companies (and certain other entities) incorporated in international financial centres have enough ‘substance‘ either in the jurisdiction in which they are incorporated or another jurisdiction where they are tax resident.
Keep following KGRN to get to know the Economic Substance Regulations UAE notification and details on the Economic Substance notification form.
The Regulations need UAE onshore and free zone companies and certain other business forms that carry out any of the defined “Relevant Activities” listed below to maintain and show a proper “economic presence” in the UAE relative to the activities they undertake (“Economic Substance Test”).
Relevant Activities:
- Banking Business
- Insurance Business
- Investment Fund management Business
- Lease – Finance Business
- Headquarters Business
- Shipping Business
- Holding Company Business
- Intellectual property Business (“IP”)
- Distribution and Service Centre Business
An entity is not needed to meet the Economic Substance Test and file an Economic Substance Dubai Report for any financial period in which it has not earned profits or income from a Relevant Activity or if it meets the conditions for being exempt. A Notification form will be needed to be given. Failure to follow the regulations can result in penalties, spontaneous exchange of information with the Foreign Competent Authority (as defined in Article 1 of the Regulations), as well as other administrative sanctions such as the suspension, revocation or non-renewal of the company’s or firm’s trade license or permit.
For more Detailed information about ESR, Visit: Economic Substance Dubai Guidelines
For enquiries, call +971 45 570 204 / E-mail: [email protected]
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