Clout is currently advising an Emirati Public Shareholding Company on the interpretation and implementation of ‘Resolution No. 31 of 2019 Concerning Economic Substance Regulations’ (the “Regulations”).Clout has been analysing the business operations of the parent company along with its foreign connected persons to conclude whether it falls under the scope of the Regulations.
The Regulations apply to UAE onshore and free zone companies, branches, partnerships, and other UAE business forms that carry out any of the following activities:
- Banking Business
- Insurance Business
- Investment Fund management Business
- Lease – Finance Business
- Headquarters Business
- Shipping Business
- Holding Company Business
- Intellectual property Business (“IP”)
- Distribution and Service Centre Business
Entities within the scope of the Regulations are required to prepare and submit economic substance declarations to their relevant regulatory authority, and may be required to meet an Economic Substance Test. It is worth noting that failure to comply with such Regulations would result to an administrative penalty, along with allowing the Ministry of Finance to share the company’s return with foreign governments.
Other jurisdictions, such as the British Virgin Islands, have introduced Economic Substance Regulations and Jordan promised to follow suit in 2020.