Economic Substance Regulations UAE

The Economic Substance Regulations have a huge impact on many companies in the UAE, especially ones that have related entities outside the UAE.

Economic Substance Regulations in the UAE

Economic Substance Regulations in the UAE.As part of the UAE’s 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, the UAE issued Economic Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019), (the “Regulations”) on 30 April 2019.

In August 2020 amendments were introduced to Resolution 31 by the Cabinet Ministers by way of Cabinet of ministers Resolution No. 57 of 2020, which repealed and replaced Resolution 31. This will complement the VAT in the UAE. The (Federal Tax Authority) FTA is taking a pragmatic approach when assessing whether a Licensee has met the Economic Substance Test.

The impacted corporate structures:

The Regulations require 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 demonstrate an adequate “economic presence” in the UAE relative to the activities they undertake (“Economic Substance Test”).

What are the 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

Economic substance Regulation compliance With Averyx Group!

Failure to comply with 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 entity’s trade license or permit.

Averyx can help you in meeting all your Economic Substance regulation compliance requirements. Our compliance experts have extensive knowledge, of ESR, international accounting, and international taxation. They can ensure your company is fully compliant. Call us today for an obligation-free consultation.