Economic substance advisory
On 30 April 2019, the UAE issued the Cabinet of Ministers Resolution No. 31 of 2019 concerning economic substance regulations, with an aim to address the findings issued by the Council of the European Union, and possible exclusion from the EU list of non-cooperative jurisdictions for tax purposes. Additional guidance in terms of Ministerial Decision No 215 of 2019 was issued providing further clarification on the original regulations.
This has increased compliance requirements (annual requirement) for UAE entities which carry out certain ‘Relevant Activities’ in the UAE. Entities will need to report compliance with the regulations (linked to state core income generating activities, direction and management, people, assets, premises and expenditure tests, in the UAE) on an annual basis, and where they are unable to demonstrate economic substance, they would be subject to penalties (and even revocation of the license, if non-compliance is repeated), and therefore, would need to evaluate the need to fulfil substance requirements, and/or consider restructuring of operations.
Please refer to our alerts for further details: Tax Alerts
What we do?
- Review group structure to determine applicability of economic substance regulations.
- Perform a gap assessment to determine the current level of compliance with the requirements which could include review of – contracts, details of assets, expenditure, and employees deployed in UAE, evidence of direction and management in UAE.
- Determine remedial options which could include – inject additional substance or restructure the entity’s’ business / operations / holdings.
- Design policies for entities to comply with the economic substance tests.
- Preparation and submission of annual notification requirements for the entities allowed to carry out a ‘Relevant Activity’ in the UAE.
- Preparation and submission of economic substance reports for entities carrying out Relevant Activities in the UAE and earning income therefrom.
- Training sessions to educate personnel on the requirements.