The UAE’s Federal Cabinet Decision 31 of 2019, issued under the 2018 Federal Anti-Money Laundering Law (“AML Law”), created what is now known as the Economic Substance Test Regulations (“EST Regulations”).
The EST Regulations require UAE onshore and free zone companies that carry out any of the listed “Relevant Activities” to maintain an adequate “economic presence” in the UAE relative to the activities they undertake.
The Relevant Activities are as follows:
Investment Fund management
Lease - Finance
Intellectual property (“IP")
Distribution and Service Centre
In relation to the term “economic presence”, this is covered under Article 6 of the EST Regulations through an “economic substance” test. The economic substance test has a number of component parts, the main one being Article 6(2)(b) under which a Licensee has to be “…directed and managed in the State”. This component itself is further defined in Article 6(3) which sets out a number of sub-tests that have to be met in order for a Licensee to be deemed to so be “directed and managed”.
The EST Regulations are not, on the face of it, limited to only licensees that have trade licence activities listed that correspond specifically to the Relevant Activities set out in the EST Regulations. Article 3(1) of the EST Regulations applies them to any “…Licensee that carries out any Relevant Activity.”
All businesses in the UAE that carry out Relevant Activities will be required by their regulating authority to complete and file an EST disclosure form. The first such filing (for the 2019 year) is now understood to be required to be filed by 30 June 2020.
The Bench can assist clients with all enquiries in relation to the EST Regulations including the completion of EST disclosure forms. For more information contact your lawyer at The Bench or email@example.com.