Governments across the globe amend their laws periodically to address common issues such as money laundering, frauds, etc., or increase transparency in the current procedures, or welfare of the common folk. With the implementation of the UAE Economic Substance Regulations from Jan 1st, 2020, the UAE government has taken steps to ease and expedite tax transparency in the country along with fair tax competition.
According to the recently implemented law, all those which fall under the subject to these regulations ought to take respective action, ensuring compliance.These new laws are applicable to natural or legal persons, including all UAE offshore and free zone organizations, branches, non-profit organizations, and partnerships also referred to as licensees. As per the new regulation, every licensee in the UAE who is associated with any of the above-mentioned activities has to submit a notification to the respective regulatory body.
Furthermore, the licensee has to satisfy an “economic substance test” and submit its report in every financial period to the respective regulatory authority.
An economic substance test is to be carried out for validation of the following facts: