Page 31 - Focus Group

Demonstrating Substance under

Economic Substance Regulation of UAE

The Economic Substance Regulation (“ESR” or to be provided. Let us look examine a few of non-
“the Regulation”) in the UAE requires a Licensee to financial information and its relevance:
submit a Notification and an Annual Report with Directed and Managed in the UAE
the Regulatory Authority within the prescribed
timelines. Each financial year a Licensee needs to A Licensee to demonstrate that the business was
ascertain whether it had carried out a Relevant directed and managed from and within the UAE.
Activity and earned Income from such Relevant Going forward, it will be required to document
Activity. If there is no income earned from such all the decisions, including strategic business
Relevant Activity, a Licensee will be required to decisions, which are taken in the meeting of
submit a Notification but is not required to submit directors. It requires at least one meeting of
the Annual Report and therefore not required to directors in the reportable period and the frequency
demonstrate Economic Substance for the relevant of such meetings depends on the nature of business
financial year. The Annual Report is required to be conducted by the licensee. The documentation of
submitted only if a Licensee carries out Relevant the Minutes of the meetings (“MOM”) etc. would
Activity and earned Relevant Income from such be required even if a Licensee is managed by an
Relevant Activity. individual like a CEO or General Manager.

Annual Report Directed and Managed Test: How to satisfy the
requirement:
Annual Report is to be filed with the Regulatory
Authority within twelve months from the end of • Register of Directors
the reportable financial year. Therefore, the first
ESR Annual Report is due on 31 December 2020 • Review relevant laws and regulations governing
for a Licensee whose financial year ended on the licensee together with the Memorandum
31 December 2019. In Annual Report, a licensee and Articles of Association on conducting the
would be required to demonstrate that it complies meeting of directors.
with the regulation and in the event it has not, it • MOM should be prepared and signed by all the
might have to justify why it did not meet with the directors attended the meeting.
requirements. Apart from the financial information,
certain non-financial information is also required • MOM and all other records should be maintained
in the UAE.

The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 31