Why these new compliance Regulations?
“The UAE introduced Economic Substance Regulations in response to a review of the UAE tax framework by the EU which resulted in the UAE being included on the EU list of non-cooperative jurisdictions for tax purposes (EU Blacklist). The issuance of the Economic Substance Regulations on 30 April 2019 (the Regulations), and the subsequent release of the Guidance on the application of the Regulations on 11 September 2019, was a requirement for the removal of the UAE from the EU Blacklist on 10 October 2019.
The purpose of the Regulations is to ensure that UAE entities that undertake certain activities are not used to artificially attract profits that are not commensurate with the economic activity undertaken in the UAE”and thus havedemonstrable economic substancein the UAE from 30th April 2019.
In respect of the UAE Economic Substance Regulations, the Ministry of Finance (MoF) has determined -in its Cabinet Resolution No. 58- the Regulatory Authorities monitoring each Relevant Activity:
|Relevant Activities||Regulatory Authorities|
|1. Banking Business||
|2. Insurance Business||
|3. Investment Funds Management Business||
|4. Lease Finance Business||
|5. Headquarters Business||
|6. Shipping Business||
|7. Holding Company Business||
|8. Intellectual Property Business||
|9. Distribution and Services Centres Business||
If you conduct a business in the UAE or hold shares in a UAE entity, whether or not you operate a relevant activity, we strongly recommend that you audit your corporate structureto upgrade it by reaching the adequate level of economic corporate substance.
UAE entities need to implement their self-assessment to determine whether they are in the scope of the new Economic Substance legislation by undertaking in this respect a 3 steps review procedure:
- Is the UAE entity a Relevant Entity?
- Is it generating income from a Relevant Activity?
- Is it meeting the Economic Substance Requirements? Is it able to pass the Economic Substance Test?
Penalties will be applied for non-compliance:
- Administrative financial penalties (up to AED50,000 for first failure to meet the economic substance test, failure to provide information or provision of inaccurate information to Regulatory Authority and up to AED300,000 for the second time failure)- statute of limitation of 1year or 6 years
- exchange of information with the foreign tax authorities of the states where their parent company, ultimate parent company and UBO’s are resident
- refusal to renew, suspension or revocation of entities ‘licenses
The authorised personnel of the Regulatory Authority may at any reasonable hour enter Business Premises to examine and take copies of any Business Document located there.
How can we assist you?
Wincore Advisory Groupcan assist you in this regulatory self-assessment to fulfil your compliance legal responsibilities by:
- to get a clear view of the new regulations and your entity’s categorisation
- reviewinginternal corporate governance, Management information system and ESR criteria fulfilment
- implementing the most cost & time effective compliant (implementing contractual and delegation arrangements) strategy to help you pass the economic substance test
- providing you with corporate secretarial servicesand fulfilling your needs at the light of the new regulations
Outsourcing this function to Wincore Advisory Groupenables you to meet your obligations in the most efficient way and avoid to waste valuable time and energy in establishing an in-house process.