On 30 April 2019, the UAE Cabinet issued the Cabinet of Ministers Resolution No.31 of 2019, concerning
economic substance regulations in the UAE, requiring all in-scope UAE entities (“Relevant Entities”) that
carry on certain activities (“Relevant Activities”) to have demonstrable economic substance in the UAE
from 30 April 2019.
The regulations have been issued in response to European Commission concerns which resulted in the
UAE being added to the European Union list of non-cooperative tax jurisdictions
The introduction of the new ES rules is a milestone for the UAE’s tax policy and an important step towards
its alignment with the global Organization for Economic Co-operation and Development’s (OECD) Base
Erosion and Profit Shifting (BEPS) directives. The main purpose is to demonstrate the actual economic
activity in UAE & not solely to benefit from the privileged tax regime.
The Regulations apply to all UAE onshore and free zone including financial free zones [DIFC and ADGM]
companies that carry on a "Relevant Activity". We expect entities incorporated under offshore (free zone)
companies regulations that carry on a “Relevant Activity” to be within the scope of the Regulations.