UAE Economic Substance Regulations Factsheet
The UAE Cabinet issued Decision No. 31 of 2019 on the Economic Substance Regulation (“the regulations”) introduces reporting and substance requirements for certain UAE entities conducting related activities.
What entities need to demonstrate economic substance in the UAE:
Any natural person or legal entity registered with an onshore or free zone authority falls within the scope of the regulations.
Senat offers comprehensive solutions that enable relevant entities conducting related activities in the UAE to comply with the regulations. We are able to assist with initial consultation, subsequent implementation as well as operational services.
- Banking activities
- Insurance works
- Investment fund
- Financial leasing
- Holding company
- Intellectual property
- Distribution & service centre
Economic substance test:
A UAE entity, conducting a related activity, will satisfy the economic substance test if:
- Generates core income from that related activity;
- The entity is directed and managed within the UAE;
- There are sufficient expenses, physical presence and qualified personnel operating for the entity in the UAE.
Sanctions & exchange of information:
In the event that a relevant entity fails to satisfy the regulations or provides inaccurate information in its reporting, the Authority may provide information to the country in which the parent company and the beneficial owner of the licensee reside regarding such failure. Penalty by way of fine may also be payable in the event of such failure.
- Assessment & classification
- Corporate services
- Notification & reporting
- Legal advice
- Accounting services
- Physical office space
- Administrative services
- Qualified employees
It is therefore imperative that businesses operating in the UAE conduct thorough audit and assessment as to whether the necessary level of economic substance is present.
Even entities not conducting a related activity must be mindful of the impact these regulations may have and implement action accordingly.
Senat MEA is a full service platform, founded in 2014, with roots in Dubai that go back as far as 1984. Dedicated to trust and efficiency, at Senat MEA we ensure that our clients are equipped with leading counsel in navigating the region while taking into account the global nature of business and the importance of developing long lasting relationships.
Senat MEA’s team of lawyers, accountants and business consultants are highly qualified and come from a variety of backgrounds enabling us to supply you with incomparable expertise and outstanding services.