How does then the new economic substance regulations apply to you?
Have you set up your company in line with the new UAE economic substance rules? If you have not yet, do it now – because if the looming deadline passes, which is today - June 30, be prepared to pay a hefty fine!
New regulations, which were implemented in the UAE for fiscal years commencing January 1, 2019 and onwards, were announced by the government the last year and encompasses several industries in the country.
Under the new economic substance rules, whatever the type of business you run and area it is based in, your company’s senior management team must be based in the UAE. This means they need to operate from the country on a full-time basis – for the activity that the business is licensed to trade in.
Regardless of the magnitude of your business - if you have a board, this means that meetings need to take place in the UAE. You will also need to be able to demonstrate these have been held on a regular basis – complete with ‘minutes’ to evidence this requirement.
• Employ full-time staff in the UAE
Apart from you being based out of the UAE – which is a given if you’re a sole trader incorporating in the UAE – if your business falls into the government-specified category you’ll need to consider how you’re going to staff your new business.
Another factor that is made clear is that employees need to be physically present - regardless of the type of contract they have with your business.
What about Outsourcing?
Outsourcing some of your work is allowed, but you must be able to clearly prove the reasons behind this and provide a basis of whether the outsourced third party has adequate resources for carrying out the relevant activity.
• Ensure your main income is generated within the UAE
One of the peak prospects of starting a business within the UAE is its exposure internationally and its proximity to Europe, Asia, and the wider Middle East and North Africa (Mena) region.
If you run a free zone business not all your clients can be based locally, that is widely understood. But if not operating a free zone operation, according to the economic substance rules, while not all your clients need to be based out of the country, the actual work should be conducted from within the UAE.
What that means is, your client can be based overseas but your main place of work – and the location where it is carried out – should be the UAE.
Here is an Example
In the case of shipping companies it means activities such as hiring, paying and overseeing crew members and overhauling ships should be conducted by a ‘licensee in the state’ – in other words, someone holding the correct government-issued trade license.
• Own assets and spend on local business services
The UAE’s income and corporate tax-free environment brings in varied business types and also an array of services, which is why entrepreneurs setting up shop here have several possible providers and third party suppliers to work with.
Placing this into consideration, the economic substance rules make it a requirement that relevant entities incur an adequate amount of operating expenditure in the UAE.
Have you set up your company in line with the new UAE economic substance rules? If you have not yet, do it now – because if the looming deadline passes, which is today - June 30, be prepared to pay a hefty fine!
New regulations, which were implemented in the UAE for fiscal years commencing January 1, 2019 and onwards, were announced by the government the last year and encompasses several industries in the country.
Under the new economic substance rules, whatever the type of business you run and area it is based in, your company’s senior management team must be based in the UAE. This means they need to operate from the country on a full-time basis – for the activity that the business is licensed to trade in.
Regardless of the magnitude of your business - if you have a board, this means that meetings need to take place in the UAE. You will also need to be able to demonstrate these have been held on a regular basis – complete with ‘minutes’ to evidence this requirement.
• Employ full-time staff in the UAE
Apart from you being based out of the UAE – which is a given if you’re a sole trader incorporating in the UAE – if your business falls into the government-specified category you’ll need to consider how you’re going to staff your new business.
Another factor that is made clear is that employees need to be physically present - regardless of the type of contract they have with your business.
What about Outsourcing?
Outsourcing some of your work is allowed, but you must be able to clearly prove the reasons behind this and provide a basis of whether the outsourced third party has adequate resources for carrying out the relevant activity.
• Ensure your main income is generated within the UAE
One of the peak prospects of starting a business within the UAE is its exposure internationally and its proximity to Europe, Asia, and the wider Middle East and North Africa (Mena) region.
If you run a free zone business not all your clients can be based locally, that is widely understood. But if not operating a free zone operation, according to the economic substance rules, while not all your clients need to be based out of the country, the actual work should be conducted from within the UAE.
What that means is, your client can be based overseas but your main place of work – and the location where it is carried out – should be the UAE.
Here is an Example
In the case of shipping companies it means activities such as hiring, paying and overseeing crew members and overhauling ships should be conducted by a ‘licensee in the state’ – in other words, someone holding the correct government-issued trade license.
• Own assets and spend on local business services
The UAE’s income and corporate tax-free environment brings in varied business types and also an array of services, which is why entrepreneurs setting up shop here have several possible providers and third party suppliers to work with.
Placing this into consideration, the economic substance rules make it a requirement that relevant entities incur an adequate amount of operating expenditure in the UAE.
No comments:
Post a Comment