• UAE entities undertaking a Relevant Activity need to submit an annual notification within six months of their financial year end indicating whether they carry out a Relevant Activity in the financial year and whether any income from that Relevant Activity has been subject to tax outside the UAE.
• UAE entities that qualify for an exemption from the Regulations, or that did not earn income from their Relevant Activity during a financial period are also required to submit a notification.
• UAE entities undertaking a Relevant Activity and earn income from the Relevant Activity also need to file an annual economic substance report, self-assessing whether they met the economic substance requirements, supported by information about the Relevant Activity income earned, the number and qualifications of the staff involved, and information about the premises and other assets used in conducting the Relevant Activity.

• Banking activities
• Insurance activities
• Fund management activities
• Financing or leasing activities
• Headquarters activities
• Shipping activities
• Holding companies
• Intellectual property (“IP”) holding or exploitation
• Distribution of goods purchased from foreign connected persons
• Provision of services to foreign connected persons

Existing entities must comply with the regulations from the beginning of their financial year end commencing on or after 1 January 2019, with the first report due 12 months after their financial year end.

New entities Must comply with the regulations from the commencement of their financial year, with the first report due 12 months after their financial year end.

Entities need to demonstrate that:

• The entity and Relevant Activity are being “directed and managed” from the UAE and,
• The entity has an adequate number of qualified employees, premises (e.g. office space), and annual operating expenditures in the UAE relative to the activity undertaken.

It is possible for an entity to carry on more than one Relevant Activity at a time, in which case generally the economic substance requirements need to be satisfied for each Relevant Activity.

In addition to exchanging information with foreign authorities, failure to comply would result in administrative penalties of AED 50,000 in the first year of failure, increased to AED 400,000 in the subsequent consecutive year(s) of failure, subject to a six-year limitation period. Additional penalties such as suspending, revoking or not renewing the UAE entity’s trade licence could also apply.