INTRODUCTION

The European Union, in March 2019, added the UAE to their blacklist of non-cooperative tax jurisdiction, due to which the Cabinet Ministers passed Resolution No. 31 of 2019, in April 2019, concerning the Economic Substance Regulations (ESR). As a result of these, EU removed the UAE from the blacklist in October 2019.

Economic Substance Regulations are set in place to ensure the UAE entities that undertake certain commercial activities are not used to artificially shift profits from high tax jurisdictions to low tax jurisdictions without any genuine economic activity or substance in these jurisdictions.

Who is subject to these regulations?

The regulations set out a reporting framework that applies to companies and/or licensees carrying out the “Relevant Activities”. These activities are listed as follows:

Banking Business
Insurance Business
Investment Fund management Business
Lease – Finance Business
Headquarters Business
Shipping Business
Holding Company Business
Intellectual property Business (“IP”)
Distribution and Service Centre Business

According to Article 8 of Cabinet Resolution No. 31 by Ministry of Finance, a company and/or licensee, conducting one of the above ‘Relevant Activity’, will be required to do the following:

  • Filing a Notification with the licensing authority and/or other regulatory authority where the company or licensee is registered and/or governed by.
  • Submit the Economic Substance Return with the licensing authority and/or other regulatory authority where the company or licensee is registered and/or governed by.

Notification

The notification must be filed each year at the time, form and manner approved by the relevant Licensing and/or Regulatory Authority starting from 1st Jan 2020. This notification will generally state:

  • Whether or not it carries out a relevant activity;
  • Whether or not all or any part of the company’s gross income in relation to the relevant activity is subject to tax in a jurisdiction outside of the UAE;
  • The date of the end of its Financial Year.
  • Additional details may be required by the Licensing and/or Regulatory Authority.

Economic Substance Return

If the company or licensee is generating income from the said relevant activity/activities, they are required to submit the Economic Substance Return demonstrating that they pass the economic substance test. In order to pass the Economic Substance Test, the company or licensee would need to demonstrate the following:

  • Core Income Generating Activity/activities (CIGA) are conducted in the UAE
  • Managed and directed in the UAE
  • Adequate expenses, employees and assets have been deployed in the UAE

This law requires relevant companies to demonstrate they have effective substance in the country. We will identify whether your company falls within the scope of the Economic Substance Laws and inform you regarding the compliance requirements that need to be fulfilled accordingly.

Prices starting from AED 1,575

CZT&A can provide an in depth and detailed evaluation of the current position of the company as per the Economic Substance Regulations and provide recommendations, where required, to remain complaint with the law.

Prices starting from AED 2,625

All entities which are required to file Annual notification to relevant regulatory authorities to declare their activities for the past financial year, CZT&A assists in filing the notification in the time, form and the manner approved by relevant Regulatory Authority.

Prices starting from AED 1,575

CZT&A provides assistance with the Economic Substance Return to be filed with relevant regulatory authorities to declare your economic substance in UAE. It shall be done in the form and manner approved by relevant regulatory authority.

Prices starting from AED 3,675

Packages

Packages Basic Package Standard Package Premier Package
Prices (Starting From) AED2,625 AED4,200 AED6,825
Initial Assessment for ES Qualification
Identifying Next Actions to ensure Compliance
Filing Notification to Regulatory Authority
Detailed Analysis with regard to ES Test
Recommendations and solution to pass ES Test
ES Report Submission to Regulatory Authority

How can we help

Our services, include Initial Assessment will guide you if your activities fall within the scope of the law, Filing Annual Notification with the regulatory authority, Comprehensive Evaluation of the company’s current state of compliance and providing recommendations with regards to the Economic Substance Test and Submitting Economic Substance Return to the licensing or regulatory authority.