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UAE: New economic substance regulations

UAE: New economic substance regulations

The United Arab Emirates (UAE) Cabinet of Ministers revoked original Cabinet Decision No. 31 concerning economic substance regulations, and issued an amended set of regulations in Cabinet Resolution No. 57 of 2020 (10 August 2020), and this was followed by the release of Ministerial Decision No. 100 of 2020 (19 August 2020) that serves as supplementary guidance with an updated “relevant activities guide” attached as appendix.

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A set of “frequently asked questions” (FAQs) has also been updated on the Ministry of Finance website reflecting the new economic substance regulations.

The new regulations are intended to be effective retroactively with regard to all licensees in the UAE beginning from 1 January 2019 onwards. In view of this, those holding licenses will need to re-assess their current economic substance regulatory classifications and align them in light of the amended regulations.

The amended regulations direct all licensees conducting a “relevant activity” to re-file notifications that were filed for FY 2019 (original due date of 30 June 2020), and the related reports will also need to be uploaded within 12 months following the end of the licensee’s financial year end (the first reports thus will be due by 31 December 2020 for the financial year ended 31 December 2019).

Among other changes under the regulations are measures concerning the role of the UAE Federal Tax Authority in assessing and enforcing compliance with the economic substance tests in the UAE.

Also, the definition of a “licensee” has been amended to mean juridical persons and unincorporated partnerships that conduct a relevant activity, whereas natural persons, sole proprietors, trusts, and foundations (that were previously considered to be licensees under the original regulations) are no longer within the scope of the regulations.


Read a September 2020 report prepared by the KPMG member firm in the UAE

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