{"id":4106,"date":"2020-01-22T22:31:20","date_gmt":"2020-01-22T18:31:20","guid":{"rendered":"https:\/\/www.premier-brains.com\/country\/?page_id=4106"},"modified":"2021-09-21T16:00:40","modified_gmt":"2021-09-21T12:00:40","slug":"economic-substance-regulations","status":"publish","type":"page","link":"https:\/\/www.premier-brains.com\/country\/economic-substance-regulations\/","title":{"rendered":"Economic Substance Regulations – UAE"},"content":{"rendered":"

Why Economic Substance Regulations?<\/h3>\n

The Council of the EU adopted a resolution on a Code of Conduct for business taxation, the aim of which was counteracting the effects of No tax or Nominal tax (\u201cNTNT\u201d) regimes around the world.<\/p>\n

In 2017 the Code of Conduct Group (Code Group) investigated the tax policies of both EU member states and other countries, assessing:
\nTax transparency;
\nFair taxation; and
\nImplementation of anti\u2013BEPS measures (The OECD\u2019s project on Base Erosion and Profit Shifting).<\/p>\n

In response to the developments, governments of the following NTNT enacted legislation introducing enhanced economic substance requirements for tax purposes, bringing the rules into force as from 1 January 2019:<\/p>\n\n\n\n\n\n\n\n
\u2022 Bahrain<\/span><\/td>\n\u2022 Jersey<\/span><\/td>\n\u2022 UAE (30 April 2019)<\/span><\/td>\n<\/tr>\n
\u2022 Bermuda<\/span><\/td>\n\u2022 Guernsey<\/span><\/td>\n<\/td>\n<\/tr>\n
\u2022 British Virgin Islands<\/span><\/td>\n\u2022 Mauritius<\/span><\/td>\n<\/td>\n<\/tr>\n
\u2022 Cayman Islands<\/span><\/td>\n\u2022 Bahamas<\/span><\/td>\n<\/td>\n<\/tr>\n
\u2022 Isle of Man<\/span><\/td>\n\u2022 Seychelles<\/span><\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Economic Substance regulations, UAE:<\/h3>\n

The UAE Cabinet issued the Cabinet of Ministers Resolution No.31 of 2019 (concerning economic substance regulations in the UAE, \u201cthe Regulations\u201d), requiring all in-scope UAE entities (\u201cRelevant Entities\u201d) that carry on certain activities (\u201cRelevant Activities\u201d) to have demonstrable economic substance in the UAE from 30 April 2019<\/p>\n

Applicability:<\/strong>
\nThe Regulations apply to all UAE onshore and free zone companies that carry on a “Relevant Activity”.
\nAs an exception, entities that are directly or indirectly owned by the UAE government (both federal and local) are specifically excluded from the Regulations.<\/p>\n

The following are considered as \u201cRelevant Activities\u201d under the Regulations:
\n? Banking
\n? Insurance
\n? Investment Fund management
\n? Lease-finance
\n? Headquarters
\n? Shipping
\n? Holding company
\n? Intellectual property
\n? Distribution and service centers<\/p>\n

The requirement of \u201cEconomic substance\u201d test:<\/strong>
\nTo satisfy the Economic substance (\u201cES\u201d) requirements in relation to a Relevant Activity, a Relevant Entity need to meet the following tests:
\nConduct the relevant \u201ccore income-generating activities\u201d (CIGA) in the UAE;
\n\u201cDirected and managed\u201d in the UAE;
\nThe company must be directed and managed in the UAE
\nDirectors need to have the necessary knowledge and expertise to discharge their duties as directors
\nBOD meets in the UAE with adequate frequency and quorum physically present
\nStrategic decisions and minutes of the meeting must be recorded and kept in the UAE
\nWith reference to the level of activities performed in the UAE:
\nAdequate number of qualified full-time employees in the UAE
\nIncur an adequate amount of operating expenditure in the UAE
\nHave adequate physical assets in the UAE.<\/p>\n

The company can outsource CIGA to a third party service provider as long as it is able to monitor and control the activities
\nHolding companies deriving income only through dividends and capital gains from equity interests, the reduced test applies.<\/p>\n

Reporting requirement for relevant Entities:<\/strong>
\nRelevant Entity will be required to submit an annual report (within 12 months from financial year-end) on its relevant activities to the relevant regulatory authority containing specified details and also declaration on whether ES test has been satisfied.
\nIf the company is a relevant entity but does not conduct the relevant activity, ES tests requirement will not be applicable but it will be required to provide a notification to the regulatory authority as per Article 8(1).<\/p>\n

Penalties where the Economic Substance Test is not met<\/strong>
\nThe administrative penalty between AED 10,000 and AED 50,000 (AED 50,000 and AED 300,000 for consecutive non-compliance) will apply for not meeting the ES Tests.<\/p>\n

Action plan for businesses<\/strong>
\nUnderstand if your entity is in the scope of the economic substance requirements. The key area to be assessed will be whether the entity performs relevant activities.
\nLook at the gaps in the level of economic substance and consider required options where gaps are identified
\nTake actions required for any structural changes or re-organization required in the entities
\nCompliance – To prepare an action plan to ensure compliance with the filing requirements set out in the regulations.<\/p>\n","protected":false},"excerpt":{"rendered":"

Why Economic Substance Regulations? The Council of the EU adopted a resolution on a Code of Conduct for business taxation, the aim of which was counteracting the effects of No tax or Nominal tax (\u201cNTNT\u201d) regimes around the world. In 2017 the Code of Conduct Group (Code Group) investigated the tax policies of both EU… Read more »<\/a><\/p>\n","protected":false},"author":1,"featured_media":12832,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"template-with-sidebar.php","meta":{"footnotes":""},"class_list":["post-4106","page","type-page","status-publish","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/pages\/4106","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/comments?post=4106"}],"version-history":[{"count":2,"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/pages\/4106\/revisions"}],"predecessor-version":[{"id":4110,"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/pages\/4106\/revisions\/4110"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/media\/12832"}],"wp:attachment":[{"href":"https:\/\/www.premier-brains.com\/country\/wp-json\/wp\/v2\/media?parent=4106"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}