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Doing Business in the UAE?

Doing Business in the UAE?

If you are, do the new Economic Substance Regulations (‘ESR’) apply to your enterprise? These rules came into effect in April 2019 however it was not until October 2019 that the Ministry of Finance published a 25-page guidance document “The UAE Economic Substance Regulations Relevant Activities Guide”

As the Economic Substance Rules have only recently been enacted and are subject to ongoing assessment and interpretation, there is still a degree of uncertainty as to how they will apply. Nevertheless, if the regulations do apply to your entity, you need to be aware of the following deadlines imposed by differing Regulatory Authorities within the UAE.

What are Economic substance Regulations?
Economic substance regulations (ER have recently been introduced across the globe in countries with no or nominal corporate tax rates in order to comply with international initiatives to combat harmful tax practices. In essence the new rules require certain legal entities established in those countries to demonstrate that they carry out substantial economic activities there.
Any entity licensed in the UAE to carry out a ‘relevant activity’ whether onshore or in a free zone and including in a financial free zone, is required to comply with the Economic Substance Rules.

The ‘relevant activities’ are insurance; banking; lease financing; investment fund management; shipping; holding company; intellectual property; company headquarters, and distribution and service centres. The definitions of company headquarters and service centre are potentially very broad and may capture many UAE businesses unaware that the Rules apply.

Any UAE entity that deals with related entities overseas should seek advice on whether they are caught within the Economic Substance Rules.

There is an exemption for entities in which the federal government, the government of any Emirate or any governmental authority or body has at least 51% direct or indirect ownership.

Check here to see if the regulations apply to your enterprise

As always, we recommend you seek expert advice as this topic- alert only – is outside the legal remit of most Notaries in the United Kingdom. Email admin@lisap38.sg-host.com  for a list parties that may be able to assist.