Skip to content

Insights About High Risk IP Business in Economic Substance Regulation in the UAE

The UAE introduced Economic Substance Regulations to honour the UAE’s commitment as a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS), and in response to a review of the UAE tax framework by the EU which resulted in the UAE being included on the EU list of non-cooperative jurisdictions for tax purposes (EU Blacklist). The issuance of the Economic Substance Regulations on 30 April 2019, and the release of Guidance on the application of the Regulations on 11 September 2019, was a requirement for the removal of the UAE from the EU Blacklist on 10 October 2019. In consultation with the OECD and the EU, amendments to the Regulations were made by Cabinet of Ministers Resolution No. (57) of 2020 on 10 August 2020 (the Regulations), and updated Guidance was issued on10 August 2020 (Ministerial Decision No. (100) of 2020 The Regulations ensure that UAE entities that undertake certain activities are not used to artificially attract profits that are not commensurate with the economic activity undertaken in the UAE.

High Risk IP Licenses Definition

High Risk IP Licensee is a Licensee which carries on an Intellectual Property Business and in respect of which any of the following two conditions apply:

(a) the Licensee –

  1. did not create the intellectual property in an intellectual property asset which it holds for the purposes of its business.
  2. acquired the intellectual property asset either from-
    1.  a Connected Person.
    2. in consideration for funding research and development by another person situated in a country other than thin e State.
  3. licences the intellectual property asset to one or more Connected Persons or otherwise generates income from the asset in consequence of activities performed by Foreign Connected Persons.

(b) the Licensee does not carry out research and development, or branding, marketing and distribution as part of its State Core Income-Generating Activity.

What are the conditions for an IP Business to be considered as “High Risk”?

All of the following conditions must be met for an IP Business to be considered as “High Risk”:

1. The Licensee did not create the IP asset which it holds for the purposes of its business;

2. The Licensee acquired the IP asset either from:  a Connected Person, or  in consideration for funding research and development by another person situated in a country other than the UAE;

3. The Licensee: licences the IP asset to one or more Connected Persons, or otherwise generates income from the asset in consequence of activities performed by Foreign Connected Persons

What does it mean if a Licensee has a “High Risk” IP Business?

1. Information is automatically shared with the foreign competent authority of the parent company, ultimate company and ultimate beneficial owner; and 2. The Licensee is presumed to not have met the Economic Substance Test, unless the Licensee meets the increased substance requirements. The increased substance requirements (in addition to those set out under Question [5]) require a High Risk IP Licensee to demonstrate that it has (and historically had) a high degree of control over the development, exploitation, maintenance, protection, and enhancement of the IP Asset, and to submit proof that: ○ It has adequate full-time employees with the necessary qualifications that permanently reside and perform their activities in the UAE – relevant employee information (e.g. experience, contracts, qualifications etc.) would need to be provided; and ○ It has a business plan showing the reasons for holding the IP in the UAE; and ○ Relevant decision making has and continues to take place in the UAE

Select The Top Auditors & Accountants Who Can Help You in Preparing You For Your ESR Notification Filing & Return Filing in Dubai, UAE

Alya Al Marzooqi Auditing( www.alyaauditors.com) is one the Top Chartered Accounting firm in the UAE, with high efficiency in the services we provide. Our Accounting division has well experienced professional executives who are well versed with the rules and regulations and laws in the UAE. For companies, our accountants shall guide to clean your books up thus making your business smooth.

Our Accounting Services Includes :

Payroll Management, Accounts payable and receivable, Credit card Management and Financial Reporting.

Other business bookkeeping services that we provide include business bank and trial balance reconciliations, balance sheets, labor cost management, and debt planning and reduction, all kinds of auditing,VAT services and ESR Filing services.

Also interested in Reading: Accounting & Bookkeeping For Startups

When you analyse these ratios, you get an overall idea of a business. You can easily decide whether to invest in a company or not.

Recent Posts

error: Content is protected !!