Economic Substance Regulations
The relevance of the regulation comes from the information exchange the UAE is extending to other counterparts, as a member of the OECD inclusive framework, when any entity is unable to prove substance in the country. UAE is working together with Governments across the globe to build an information sharing model and consequently new regulations are emerging.
Economic Substance Regulations (ESR) require onshore and free zone companies that carry out specified Relevant Activities, to maintain and demonstrate an adequate economic presence in the country. It can be challenging for multi-national groups, with operations spanning across multiple closely regulated jurisdictions, to accurately position economic value creation in respective countries. Deciding on the purpose, the extent and management within the country need to be done with the regulatory framework in the background. Businesses need to assess their activities for the year and decide if any of the activities are covered in the scope of relevant activities of the substance regulations. Planning early and assessing activities undertaken before deciding on the compliance requirements are the most critical steps. We can assist in planning, structuring and complying activities so as to reflect economic presence in the region where the economic value is created.