April 30 2019, the United Arab Emirates (UAE) Cabinet issued the Cabinet of Ministers Resolution No.31 of 2019 (concerning economic substance regulations in the UAE, “the Regulations”). The introduction of the Regulations requires relevant UAE entities that perform certain business activities to be able to demonstrate economic substance in the UAE from April 30 2019.
The launch of the Regulations follows the outcome of the European Union (EU) including the UAE on a list of non-cooperative jurisdictions for tax purposes (EU Blacklist). In addition, the Regulations demonstrates the continuous efforts of the UAE to fulfil all EU requirements and the highest international standards on taxation including the Organisation for Economic Co-operation and Development (OECD) conditions.
The substance requirements will apply to all UAE onshore and free zone companies that generate income conducted by “Relevant Activities” such as:
Corporate entities that are owned by the UAE government are excluded from the Regulations. UAE sovereign investment funds and any other UAE government related companies would not need to meet UAE economic substance requirements. Furthermore, a company is not obliged to meet and pass the economic substance test if it does not make income in relation to a relevant activity it carries.
UAE onshore and free zone entities will need to meet and satisfy they have effective economic substance in the UAE, by passing the test in relation to the relevant business and activities. A company meets the economic test if it:
The relevant licensee has an obligation to annually prepare and submit the Economic Substance Report (Report) to the Regulatory Authority (to be determined by the Cabinet of Ministers’ resolution). The Report is to evidence that the licensee / entity satisfies the requirements and include information on the licensee’s relevant activities such as:
It is essential that all relevant entities comply with the Regulations.
Failure to comply may result as:
A company that outsources some of its activity to a third-party service provider must comply with the Regulations. Such third-party service providers must within their own right have sufficient presence in the UAE and be able to demonstrate it has enough supervision of the outsourced activities.
It is vital that your UAE business understands the economic substance requirements and the obligation to annually prepare the Report and file it with the Relevant Authority.
Creation Business Consultants are able to help you get a clear understanding of the requirements that could potentially apply to your UAE Company. Creation provides a full range of services including company secretarial services and other outsourced services and packages bespoke for all UAE entities. It is important that you look at key areas of your operation that the Regulations may impact concerning corporate structuring and tax aspects and to ensure to comply to the Regulatory standards. Please feel free to contact our corporate services team on [email protected] or +971 4 878 6240 should you require a quotation for a corporate structure assessment report and assistance.
Creation ensures clients receive a seamless, cost effective and proficient entry to the GCC market. We provide clients with the foundations and best practices empowering them to build and control a successful business.
We continuously strive to exceed client’s expectations whilst making certain they are protected from undue risk at all times. Creation Business Consultants is the preferred and truly trusted business partners for the GCC.