- The Economic substance test is required to be met for each relevant activity by conducting the Core-Income Generating Activities (CIGA) in UAE. The list of activities is provided by regulation for CIGA, but it is not exhaustive list. It is clarified that CIGA includes the activities listed in the regulation, but the list is not restricted to those activities. We assume that any incidental or ancillary activities in relation to the main relevant activity will also take the color of relevant activity and fall under the list of CIGA.
- It is stated that the business of the licensee should be directed and managed in UAE, which means the board meetings should be held in UAE. Further, the quorum of the meeting, minutes of meeting duly signed by the directors attending the meeting need to be maintained. Physical presence & Expertise of the Directors is mandatory requirement. It is also made clear that atleast one meeting in one Financial Year or as required by the law applicable to the Licensee should be conducted in UAE for discussing the matters of the Company.
In cases where Companies are managed by Manager & CEO, the requirements shall apply to that concerned Manager or CEO. Also, the responsibility lies with the licensee to prove that the Manger or CEO has relevant knowledge and expertise to take decisions and merely acting on the decisions taken outside UAE.
iii. One of ESR test is to have adequate number of qualified employees to conduct licensee activities. Adequate number will depend on the nature and the size of Business of Companies. Again, the responsibility lies on the licensee to prove to the regulatory authority the genuineness of the activities with the available Employees, Operating Expenditure and Assets.
- Licensee Company carrying on relevant activity must incur adequate Operating Expenditure, should have adequate Physical Assets and appropriate Premises to conduct business. Again, what is adequate & appropriate will depend on the nature and the size of Business of Companies. It is made very clear that Licensee has to maintain all the records and should be in a position to prove or demonstrate the adequacy & appropriateness of its Expenses & Assets.
These requirements are to be satisfied to prove that the licensee holds substance and the business are genuine.
Details on what will be included in the State Core Income-generating Activities for the above mentioned 9 relevant activities will be followed in our future blog.