UAE Economic Substance Regulation Update:
Issuance of Cabinet of Ministers Resolution No. 57 of 2020 and Ministerial Decision 100 of 2020 – In-depth review
On 10th and 19th August 2020 respectively, the Ministry of Finance issued Resolution No. 57 of 2020 (“Resolution”) and Ministerial Decision No. 100 of 2020 (“Ministerial Decision”) on Economic Substance Regulations [ESR].
The Resolution repeals (i) Cabinet of Ministers Resolution No. 31 of 2019 – which introduced ESR in the UAE –, (ii) Ministerial Decision No. 215 of 2019 – which amended the latter –, and Cabinet Resolution No. 58 of 2019 – which identified ‘Relevant Authorities’ for each Relevant Activity, effectively combining the most updated ESR related provisions into one single document.
The Ministerial Decision, in turn, comprises the new official ‘Relevant Activity Guide’, repealing the previous Relevant Activity Guide issued in April 2020. It is intended to provide further guidance and directions to entities carrying out a Relevant Activity.
What’s new? what should I be aware of?
Re/think has prepared a table comparing the previous and updated ESR regimes, tracking the most important changes made and novelties introduced.
Please refer to this link: ESR Comparison – Relevant Activity Guidance
In light of the Resolution, all Licensees and Exempt Licensees must re-file an ESR Notification via the Ministry of Finance Portal, once it becomes available. The new deadline for this re-submitting of the ESR Notification is expected to be published imminently by the Authorities.
We therefore strongly recommend that all Licensees and Exempt Licensees reassess their scope vis-à-vis the new ESR regime in order to be ready to re-submit the ESR Notification once the Ministry of Finance’s Portal is available and the new deadline is published.
Thereafter, all Licensees must start preparing the Economic Substance Report to be submitted at the end of the year.
All UAE entities falling within the scope of ESR must review their governance arrangement and put in place all necessary measures to comply with the ESR requirements from now on. Non-compliant practices should be remediated without further delay.