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, UAE introduced various Federal Legislation including:
The above legislations apply across the whole of the UAE, including all Free Zones and Financial Free Zones (such as the Dubai International Financial Centre).
On 17th December 2019, the DIFC issued specific guidelines on Economic Substance Regulations applicable to all DIFC entities including private companies, public companies, partnerships (LLP, LP & GP), Foundations, non – profit organization, and branches established in the DIFC.
Please note it is important to analyze 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.
As per the guidelines introduced by the DIFC, 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 being undertaken by the entity.
In order to meet the Economic Substance Test, a DIFC Licensee needs to demonstrate all three of the following conditions:
ALL DIFC entities are required to: