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UAE: New economic substance regulations for UAE companies

UAE: Economic substance regulations for UAE companies

New regulations provide economic substance rules for UAE companies.


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The economic substance rules were included in Cabinet of Ministers Resolution No. 31 of 2019 (30 April 2019) and introduce an “economic substance” requirement for all UAE entities that reflects the level and type of activity they undertake. Economic substance can broadly be considered to consist of employees, premises, management, and costs. There are also various regulatory filing requirements that need to be met in order to comply with the regulations.

The UAE regulations were issued, in part, as a response to European Commission concerns that resulted in the UAE being added to the EU’s list of non-cooperative tax jurisdictions. The regulations also may be viewed as further aligning UAE’s legislative framework to the standards set out in the OECD base erosion and profit shifting (BEPS) project. The regulations are similar to economic substance requirements recently implemented in jurisdictions such as the Cayman Islands and Jersey.

All UAE entities will need to examine whether they meet the “economic substance” requirements and consider how they will comply with the regulations, either by bolstering UAE economic substance or restructuring.

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