Economic substance was introduced by the UAE Ministry of Finance in the form of Cabinet of Ministers Resolution No. 31 of 2019, dated 30 April 2019 (UAE ESR), which was followed by Ministerial Decision No. 215 on the issuing of directions for the implementation of ESR and Cabinet Resolution 58 of 2019 designating the Regulatory Authorities for the purposes of UAE ESR. According to UAE ESR, every entity in the UAE is expected to assess whether:

1. Whether or not it is carrying out any of the specified Relevant Activities under UAE ESR; and

2. Whether or not the entity complies the UAE ESR requirements/tests if it is doing one or more of the prescribed Relevant Activities.

The Regulatory Authority must be informed of and receive a report from the licensee performing the prescribed Relevant Activities on an annual basis (can be determined basis Cabinet Resolution 58 of 2019 mentioned above).

What are The Relevant Activities?

According to the Regulations, the following are “Relevant Activities”:



3.Fund administration




7.Company holding

8.Intellectual property (IP)

9. Distribution and service center

What are the economic substance requirements in the UAE?

To meet the Economic Substance Test in connection to any Relevant Activity, an entity must meet the following fundamental criteria:

1.Conduct “key income-generating activities” in the UAE;

2. Be “directed and managed” in connection to that activity in the UAE; and

3.In terms of the level of activity carried out in the UAE:

  • Having a sufficient number of qualified full-time employees in the UAE
  • In the UAE, incur a suitable amount of operating expenditure.
  • Have sufficient physical assets in the UAE

What are the UAE economic substance regulations reporting requirements?

A relevant entity will be required to report specific information on its Relevant Activities to the relevant regulatory body on an annual basis (that has issued the trade license to such an Entity).

• Existing entities (established on or before April 30, 2019) – Must comply with the Regulations beginning April 30, 2019, with the first return due in 2020.

• New entities (created after April 30, 2019) – Must comply with the Regulations upon getting a trading license; first return due in 2020. (or later)

Leave a Reply

Your email address will not be published. Required fields are marked *