The Resolution repeals (I) the Cabinet of Ministers Resolution No. 31 of 2019, which presented the UAE Economic Substance Regulations (ESR) in the UAE, and (ii) Cabinet Resolution No. 58 of 2019, which distinguished “Applicable Authorities” for each Relevant Activity.

The Resolution accordingly adequately joins the most refreshed ESRs into one single archive. The Ministerial Decision, thusly, includes the new authority “Applicable Activity Guide,” revoking Ministerial Decision No. 215 of 2019 and supplanting the past Relevant Activity Guide gave by the Ministry of Finance in April 2020. It is planned to give further direction and bearings to substances doing a Relevant Activity.


The ESRs apply to all substances carrying on a “Pertinent Activity,” characterized underneath, in the UAE, incorporating elements set up in free zones and monetary free zones, for example, the Dubai International Financial Center and the Abu Dhabi Global Market. Such elements need to meet the Economic Substance Test (characterized underneath) and make notices and reports to the Ministry of Finance, or will chance fines and managerial punishments.

Significant Activities

The Relevant Activities comprise of:

  1. Banking
  2. Protection
  3. Speculation reserve the executives
  4. Account renting
  5. Central command
  6. Delivery
  7. Protected innovation
  8. Holding organization
  9. Dissemination and administration focus

Economic Substance Test

To meet the Economic substance test, a Licensee (as characterized underneath) should meet the entirety of the accompanying rules:

  1. It directs the important “Center Income-Generating Activity,” as determined in the Regulations, in the UAE
  2. It is coordinated and overseen in the UAE according to that movement
  3. It has a sufficient number of qualified full-time representatives who are actually present in the UAE
  4. It brings about satisfactory working use in the UAE
  5. It has sufficient actual resources in the UAE


Extent of Application

The meaning of a “Licensee” has been limited. The ESR presently just applies to juridical people and unincorporated organizations that complete a Relevant Activity (each a Licensee), while regular people, sole owners, trusts, and establishments (that were additionally considered as Licensees under the first guidelines) at this point don’t fall under the extent of the ESR.

Additionally, the ESRs present four new exceptions from documenting a financial substance report and the necessity to exhibit substance in the UAE (Exempted Licensees). These Exempted Licensees are:

  1. elements that are charge inhabitant outside the UAE;
  2. venture supports other than independent assets, and their basic SPVs or speculation holding elements (this exclusion doesn’t reach out to either the asset director or the elements in which the speculation reserve at last contributes);
  3. elements that are completely claimed by UAE occupants and that are not piece of a global gathering that solitary carries on business exercises in the UAE; and
  4. a UAE part of an unfamiliar substance that is liable to burden on the entirety of its important pay in an unfamiliar ward.

Nonetheless, it should be noticed that under the previous economic substance system, elements with at any rate 51% UAE government proprietorship were excluded. Under the refreshed ESR, this exclusion does not make a difference anymore.

Explanation on Treatment of Branches

The ESRs have explained the treatment of branches and the appropriateness of the ESR to branches in the UAE. In the event that the parent of a branch is enlisted in the UAE, it should document as a solitary Licensee, detailing the Relevant Activities of itself and all its UAE branches in a single composite notice as well as economic substance report.

On account of UAE parts of an unfamiliar element, such a branch would need to agree to the guidelines as though it was a different legitimate individual. In any case, the UAE branch may have the option to profit by an exception which gets pertinent in situations where the applicable pay of the branch is accounted for in the expense form of the unfamiliar parent.

Applicable Activity Clarifications

There have likewise been changes to the meanings of certain Relevant Activities, including “Conveyance and Service Center Business” and “Holding Company Business.”

ESR Test Clarifications

There are no progressions to the ESR tests which Licensees need to attempt, just as the meanings of the center pay producing exercises, aside from certain minor explanations and some extra direction. For example, the overseers of the Licensee don’t should be inhabitant in the UAE.

In any case, a Licensee’s governing body should meet in the UAE at a satisfactory recurrence having respect to the measure of decisionmaking needed at that level and the movement levels of the Licensee. At such executive gatherings, there should be a majority of chiefs truly present in the UAE and the executive gatherings should be recorded in composed minutes and endorsed by the chiefs joining in.

Administrative Authorities

The Federal Tax Authority has been named as the “Public Assessing Authority” and will be answerable for making the assurance on whether a Licensee has monetary substance in the UAE.

The part of the other administrative specialists (i.e., the Department of Economic Development, the Ministry of Finance, the Dubai International Financial Center Registrar of Companies, and the Abu Dhabi Global Market Registration Authority) is to gather and check data gave by Licensees inside their transmit and help the Federal Tax Authority in its obligations. In this manner, the job of the other administrative specialists is currently more restricted under the ESR.

Detailing Requirements

Licensees and Exempted Licensees should now make notices and submit economic substance reports to the Ministry of Finance instead of their skillful administrative authority through the Ministry of Finance online entryway, which will go live the principal seven day stretch of December 2020.

Organizations that generally submitted warnings as well as economic substance reports to their administrative specialists or whose notices and additionally economic substance reports were expected before the Ministry of Finance gateway was accessible, will be needed to submit or resubmit these by 31 December 2020.


All notices by Licensees and Exempted Licensees completing an important action should be made inside a half year from such Licensee’s or Exempted Licensee’s financial year end.

Notices should incorporate the

(a) Relevant Activity,

(b) net pay from the Relevant Activity,

(c) monetary year start and end dates, and

(d) some other data as might be mentioned by the applicable specialists.

Any element which professes to be an Exempted Licensee should incorporate with their notice proof proving its status as Exempted Licensee.

Economic Substance Report

Licensees needed to meet the economic substance test should present their Economic Substance Report to the Ministry of Finance inside a year after the Licensee’s financial year end (this cutoff time is unaltered). This should contain the accompanying data:

Sort of Relevant Activity directed

  • Sum and sort of gross pay from the Relevant Activity
  • Sum and kind of working costs and resources in regard of the Relevant Activity
  • Area of spot of its business and, if pertinent, plant, property, or hardware utilized for the Relevant Activity
  • Number of full-time workers with capabilities and number of staff who are answerable for carrying on the Relevant Activity
  • Center Income-Generating Activity in regard of Relevant Activity being done by it

Budget summaries

Announcement with regards to whether the Licensee fulfills the economic substance test

On account of Relevant Activity being a protected innovation business, announcement with regards to whether it is a high-hazard IP Licensee

There is additionally an expanded detailing trouble. All Licensees doing a pertinent movement will currently have to distinguish in their warnings/reports the ward in which their parent and extreme advantageous proprietor guarantee to be assessment occupant.


The punishments under the ESR have now additionally expanded and are as per the following:

AED 50,000 for inability to submit report or inability to meet the necessities of the tests in the principal year

AED 400,000 for inability to submit report or inability to meet the necessities of the tests in the subsequent year

AED 50,000 for giving wrong data to the pertinent administrative power or Federal Tax Authority

AED 20,000 for inability to present a notice

Permit cancellation for tireless resistance.


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