We provide ESR UAE services to help companies remain compliant with the requirements of Economic Substance Regulations UAE. We start with a review of group structure and activities, determine ESR applicability, and evaluate compliance with ESR UAE. We then decide on corrective actions, establish ESR compliant policies, assist in filing notifications, and Economic Substance Regulations. We also provide training on Economic Substance regulations and policies.
Economic Substance Regulations in UAE
In May 2018, UAE joined the OECD Inclusive Framework on BEPS as a part of its commitment as a member of OECD. H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai has announced the Resolution of the Cabinet of Ministers No. (31) for 2019 concerning Economic Substance Regulations (ESR/Regulations) on 30 April 2019. Ministry of Finance issued directives (Ministerial decision No. 215) with an objective to make available more details regarding the legislation of Economic Substance Regulations in UAE.
The objective of ESR UAE
The main purpose of the ESR UAE is to protect the reputation of the State and whose entities that operate within UAE- whether onshore, Free Zone or offshore by ensuring that income generated from Relevant Activity has economic substance and give a base to support that the incorporation in the UAE was not motivated to benefit from the privileged tax regime.
What are the Economic Substance Regulations/ Test?
The Economic Substance Regulations is established on the three crucial pillars that a Licensee/Company must fulfill the criteria as under, to meet the Economic Substance Regulations/Test in relation to any Relevant Activity.
Core Income Generating Activity (“CIGA”) associated with the activities covered by the ESR should be undertaken in the UAE;
Licensee/Company should be directed and controlled from the UAE;
The Licensee’s activities must be carried out with adequate local “Economic Substance” with regard to the level of relevant activity in the UAE. The Economic substance consists of: