We’re a leading firm of chartered accountants & VAT/Tax advisers supporting entrepreneurs, high net worth individuals, family offices and growing businesses in UAE.
As a member of Organization for Economic Development and Cooperation (OECD), and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group, the UAE has committed to ensuring standards related to Base Erosion and Profit Shifting (BEPS) are implemented.
During 2019, the UAE introduced various Federal Legislation including:
The above legislation applies across the whole of the UAE, both onshore and Free Zones, including Ras Al Khaimah International Corporate Centre (“RAK ICC”).
Recently, RAK ICC issued specific guidelines on Economic Substance Regulations applicable to all RAK ICC entities. The regulations, which apply to financial years commencing on or after 1 January 2019, mandate RAK ICC entities that undertake “Relevant Activities” to demonstrate” Economic Presence” in the UAE in relation to the activities they undertake.
The Regulations apply to RAK ICC entities that earn income from one or more Relevant Activities. Relevant activities being Banking, Insurance, Investment Fund management, Lease, Headquarters, Shipping, Holding, Intellectual Property, Distribution and Service Centre Businesses.
Please note it is important to analyse and conduct an impact assessment of the businesses activities in order to determine whether the business falls under the purview of Economic Substance Requirements in the UAE.
The guidelines issued by RAK ICC defines the concept of ‘Parent company’ and ‘Ultimate Parent Company’ unlike the Economic Substance Regulations regulations issued by the UAE Ministry of Finance which only provides the definition of ‘Ultimate Beneficial Owner’.
The Parent Company under the RAK ICC guidelines is defined as the entity that directly:
The Ultimate Parent Company under the RAK ICC guidelines is an entity of the group that:
As per the guidelines introduced by the UAE Ministry of Finance, in order to determine whether a Relevant Activity is taking place, a substance over form approach should be followed. This means looking beyond what is stated on the commercial license to what activity is actually being undertaken by the entity.
In order to meet the Economic Substance Test, a RAK ICC entity needs to demonstrate all three of the following conditions:
However, in case the above activities have been outsourced by the RAK ICC entity, it is important that the RAK ICC entity demonstrates adequate supervision of the outsourced activities.
Following the recent guidelines from RAK ICC, all RAK ICC entities are required to:
RAK ICC entities are required to provide the following information:
Entities are required to provide the registered office address; certificate of incorporation/commercial license/trade license/permit number; legal form/company type; financial year/accounting reference period
Entities are required to indicate the start and end date of the relevant financial period
Entities are required to provide information (i) whether they carried out a Relevant Activity; (ii) indicate whether the entity earned income from the Relevant Activity during the reportable period; and (iii) indicate whether the gross income from each Relevant Activity was fully or partially paid, subject to tax in a jurisdiction other than the UAE.
Entities need to confirm (i) whether its share capital is at least 51 percent owned by the UAE Federal Government, the Government of an Emirate, or any governmental authority of body of the UAE Federal or an Emirate Government in order to claim an exemption from the filing of Economic Substance Return; and (iii) whether the entity is a tax resident outside the UAE during the reportable period
Entities are required to provided details of the dedicated contact person which can include a representative of the registered agent; an entity official; or the compliance officer
A RAK ICC entity would be liable to an administrative penalty of AED10,000 – AED50,000 if it either fails to provide required information or knowingly provides inaccurate information. Penalties will also increase to between AED50,000 and AED300,000 in the subsequent year(s) of non-compliance.
Failure to comply may also lead to administrative action including potential suspension, revocation, or non-renewal of its registration.
Alya Auditors provides all kinds of Auditing including Forensic Auditing & Accounting,Due Diligence Auditing ,Statutory Auditing & Concurrent Auditing. Alya Auditors provide all services for clients in DMCC and all other free zones. Alya also combines the use of advanced software with the guidance of accounting professionals. We provide professional services in the field of Auditing, Accounting, Company Formation & VAT Consultation etc.Our customers benefit from a team of trusted, in-house experts ready to meet your accounting needs.
Apart from all these services we are also extending our scope of the business in the UAE by providing ESR (Economic Substance Regulation) Filing services for businesses in the UAE.
In this regard, the tax team at ALYA is extending its support to all businesses in conducting: