Newsletter 10/2020

Legal updates

Economic Substance Regulations

UAE Updates Economic Substance Regulations – New Rules, New Substance

The United Arab Emirates had introduced the Economic Substance Regulations (“ESR”) (Cabinet Decision No. 31/2019) [“Original Regulations”], which came into effect on 30th April 2019. The Ministry of Finance had issued a guidance on the application of the Regulations which was enforced on 11th September 2019 (Ministerial Decision No. 215 of 2019), and the Determination of Regulatory Competencies lists the Regulatory Authorities tasked with the administration and enforcement of the Regulations (Cabinet Decision No. 58/2019).

On 10th August 2020, the amended set of regulations was issued by Cabinet of Ministers Resolution No. 57 of 2020 (“New Regulations”), followed by the updated guidance issued by the Ministerial Decision No. 100 of 2020 (“New Guidance”). The New Regulations had repealed and replaced the Original Regulations.

The New Regulations are intended to be implemented retrospectively on all the licensees in the UAE since 1st January 2019. In this regard, the licensees are obliged to re-evaluate the existing ESR classifications and align it in accordance to the New Regulations. The New Regulations provide more transparency and needs businesses in UAE to be accountable and consequently avoid harmful tax practices. All UAE businesses that may be subject to these regulations should be prepared to take action and ensure compliance. For more information on the key changes click here 

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