Requirement to provide information under Economic Substance Regulation in UAE
- A Licensee shall notify the Regulatory Authority annually of the following –
- whether or not it is carrying on a Relevant Activity.
- if the Licensee is carrying on a Relevant Activity; whether or not all or any part of the Licensee’s gross income in relation to the Relevant Activity is subject to tax in a jurisdiction outside of the State, in all cases such Licensee shall provide the Regulatory Authority with all information and documentation required to be submitted by it pursuant to this Resolution or any further guidance or decision issued pursuant to this Resolution.
- the date of the end of its Financial Year.
- The notification under Clause 1 of this Article shall be made at the time specified by the Regulatory Authority and in the form and the manner approved by the Regulatory Authority.
- A Licensee that is carrying on a Relevant activity and is required to satisfy the Economic Substance Test shall, no later than twelve (12) months after the last day of the end of each Financial Year of the Licensee, prepare and submit to the Regulatory Authority a report which report shall be submitted by the Regulatory Authority to the Competent Authority.
- The report under sub clause 3 of this Article shall be in the form approved by the Competent Authority and shall include the following information with respect to the Licensee –
- the type of Relevant Activity conducted by it.
- the amount and type of relevant income in respect of the Relevant Activity.
- the amount and type of operating expenses and assets in respect of the Relevant Activity.
- the location of the place of business and, if applicable, plant, property or equipment used for the Relevant Activity of the Licensee in the State.
- the number of full-time employees with qualifications and the number of personnel who are responsible for carrying on the Licensee’s Relevant Activity.
- information showing the State Core Income-Generating Activity in respect of the Relevant Activity that has been conducted.
- a declaration as to whether or not the Licensee satisfies the Economic Substance Test.
- in the case of a Relevant Activity being an Intellectual Property Business, a declaration as to whether or not it is a high risk intellectual property business. If the Licensee declares that it is a high risk intellectual property business, the Licensee shall provide the information under paragraph (i) to refute a determination made by the Regulatory under Clause 3 of Article 7 of this Resolution.
- in the case of a Licensee that is carrying on a high risk intellectual property business the following additional information must be provided:
- Information demonstrating that the Licensee does and historically has exercised a high degree of control over the development, exploitation, maintenance, enhancement and protection of the intellectual property asset by an adequate number of full-time employees, with the necessary qualifications, who permanently reside and perform their activities in the State.
- business plan showing the reasons for holding the ownership in the Intellectual Property Asset in the State.
- employee information, including level of experience, type of contracts, qualifications and duration of employment with the Licensee.
- evidence that decision making is taking place within the State.
- where a Relevant Activity is outsourced by a Licensee, the Licensee must demonstrate the following:
- the Relevant Activity that is outsourced is a Core Income-Generating Activity being carried out in the State
- the Licensee has adequate supervision of the Relevant Activity outsourced.
- the Licensee shall submit to the Regulatory Authority a report containing information in relation to the level of resources employed by the third party service provider to which the Relevant Activity is being outsourced, demonstrating that the service provider’s activities, employees, operating expenditures and premises in the State are adequate in relation to the level of Relevant Activity outsourced.
- A Licensee shall provide the Regulatory Authority with any such additional information, documents or other records as shall be reasonably required by the Regulatory Authority to make a determination under Article 7 of this Resolution.
- The Regulatory Authority may serve notice on the Licensee requesting the provision, within the period specified in the notice and at such place as is specified in the notice, such documents and information as the Regulatory Authority may reasonably require for the purpose of facilitating the Regulatory Authority’s exercise of functions under this Resolution.
- A Licensee who, as may be required under this Resolution, to keep any records in a language other than English, must, upon a request by the Regulatory Authority, provide a translation of these records into English.
Who needs to notify and by when?
Licensees that undertake a Relevant Activity (irrespective of whether the Licensee qualifies for an exemption under the Regulations or has earned income from the Relevant Activity during the relevant financial period) need to submit a simple notification with its Regulatory Authority. Notifications for the financial period 2019 can be filed on or after 1 January 2020.
Who needs to file an economic substance return and by when?
Only Licensees that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an economic substance return. Economic substance returns must be filed within 12 months from the end of the relevant financial period.