On 30 April 2019, the UAE Cabinet issued the Cabinet of Ministers Resolution No.31 of 2019 (concerning economic substance regulations in the UAE, “the Regulations”), requiring all in-scope UAE “Relevant Entities” that carry on certain “Relevant Activities” to have demonstrable economic substance in the UAE from 30 April 2019.
Who is subject to the Regulations?
The Regulations apply to all UAE onshore and free zone companies that perform a “Relevant Activity”. It is still unknown whether the Regulations will also apply to sole proprietorships and branches, but it’s likely that the entities incorporated under offshore (free zone) companies regulations that perform a “Relevant Activity” will be within the scope of the Regulations.
The Regulations apply to UAE onshore and free zone companies, branches, partnerships, and other UAE business forms (referred to as Licensees) that carry out any of the following Relevant Activities.
- Banking Businesses
- Insurance Businesses
- Investment Fund Management Businesses
- Lease-Finance Businesses
- Headquarter Businesses
- Shipping Businesses
- Holding Company Businesses
- Intellectual Property Businesses
- Distribution and Service Centre Businesses
In order the satisfy the Economic Substance Regulations requirements, companies operating in the above industries must:
- Conduct the relevant “core income-generating activities” in the UAE;
- Be “directed and managed” in the UAE;
- Have adequate number of qualified full-time employees in the UAE
- Incur an adequate amount of operating expenditure in the UAE
- Have adequate physical assets in the UAE.
The Regulations apply to financial years starting on or after 1st of January 2019.
BookRobo experts can assist you in considering and assessing the impact of these regulations in your company and will be able to guide you through the whole compliance process.
Find out more about our Economic Substance Regulations Consulting Services and get in touch with us to make sure you avoid any potential penalties if your company is carrying out any of the Relevant Activities.