The UAE Cabinet recently issued resolution Number 31 of 2019 (the Resolution). The Resolution concerns with regulations for economic substances in the United Arab Emirates. These regulations make it necessary for some companies to determine that they possess any effective substance in the country. This is done by fulfilling certain tests related to the relevant activities that are mentioned in the regulations.

It was in November 2018 that the Organisation for Economic Cooperation and Development (the OECD) announced the international standards for Base Erosion and Profit Shifting (BEPS). These regulations make a framework for preventing the relocation of business activities which has applicability to the preferential regimes for the geographically mobile incomes.

The Resolution was passed on 30 April 2019 which included an entire scope for UAE entities which carry on the relevant activities demonstrating economic substances in the UAE.

  • The regulations apply to all the UAE onshore and Freezone companies which carry on the relevant activities as mentioned in the regulations.
  • UAE Government owned entities (directly or indirectly) are exclusive of the regulations

What are Relevant Activities under regulations?

  1. Banking
  2. Distribution and service centre
  3. Fund management
  4. Intellectual property (IP)
  5. Insurance
  6. Lease-finance
  7. Holding company
  8. Headquarters
  9. Shipping

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.