Compliances

ESR (Economic Substance Regulation)

As part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation, UAE has implemented Economic Substance Regulations (ESR).

The Regulations require UAE onshore and free zone companies and certain other business forms that carry out any of the defined “Relevant Activities” listed below to maintain and demonstrate an adequate “economic presence” in the UAE relative to the activities they undertake (“Economic Substance Test”)

Relevant Activities:

  • Banking Business
  • Insurance Business
  • Investment Fund management Business
  • Lease - Finance Business
  • Headquarters Business​​
  • Shipping Business
  • Holding Company Business 
  • Intellectual property Business (“IP")
  • Distribution and Service Centre Business
The Regulations came into effect from financial years commencing on or from 1 January 2019. Entities that are within the scope of the Regulations are required to submit an annual Notification form within 6 months from the end of the financial year to FTA. Entities that have income from Relevant Activities are required to complete and submit to FTA an Economic Substance Report within 12 months from the end of their financial year (e.g. 31 December 2022 for entities with a financial year ending 31 December 2021).

Economic Substance Test

A licensee meets the EST in relation to relevant activity in the following cases:

FIRST TEST - The Licensee shall conduct the Core Income-Generating Activity (CIGA) within the UAE

SECOND TEST - The Relevant activity are being DIRECTED and MANAGED in the UAE

THIRD TEST - ADEQUACY test The Licensee, having regard to the level of Relevant Activity, has an adequate:

  • Number of qualified full-time employees physically present in UAE
  • Operating expenditure incurred in the UAE.
  • Physical assets in the UAE;

Failure to comply with the Regulations can result in penalties, spontaneous exchange of information with the Foreign Competent Authority, as well as other administrative sanctions such as the suspension, revocation or non-renewal of the entity’s trade license or permit.

We provide the below range of services to assist you and make your business a compliant one:

  • Year on year assessment of whether Relevant Activities have been carried out during the financial period
  • Notification assistance
  • Reporting assistance
  • Secretarial Services related to ESR

AML (Anti Money Laundering)

Money laundering and the financing of terrorism are crimes that threaten the security, stability and integrity of the global economic and financial system, and of society as a whole. The Anti Money Laundering (AML) Laws in UAE have been enacted to combat money laundering, terrorist financing and other related threats to the nation.

The Anti-Money Laundering Law in UAE requires the Financial Institutions and DNFBPs to establish a comprehensive AML/CFT Program including AML Policy for KYC, Screening, Risk Profiling, Governance, STR Filing, and more. The AML Policy, Procedures and Guidelines have to be commensurate with the nature and size of the business. The AML Compliance Officer has to ensure that the provisions of the UAE AML Law are complied with.

AML Applicability in UAE

Financial Institutions

  • Private Banking Services;
  • Credit Facilities of All Types;
  • Cash Brokerage Services;
  • Currency Exchange and Money Transfer Services

DNFBP (Designated Non-Financial Businesses and Professions)

  • Brokers and Real Estate Agents
  • Dealers in precious metals and precious stones
  • Lawyers, notaries, and other independent legal professionals and independent accountants
  • Providers of corporate services and trusts
  • Any other Designated Non-Financial Businesses and Professions (DNFBPs) not mentioned above.

What you need to do?

  • Register on Financial Intelligence unit (goAML system online)
  • Appoint a Compliance officer in the organization with appropriate authority and responsibility. Periodic reporting to Entity Management
  • Define and regularly update internal policies, controls, and procedures to mitigate ML/FT risks in accordance with the nature and size of business
  • Carryout Know your customer procedure (KYC) and Customer due diligence
  • Ongoing monitoring and ensuring compliance with sanctions screening and reporting any suspicious activity
  • Maintain the records as required by the Law

We provide the below range of services to assist you and make your business a compliant one:

  • Assistance in Registration
  • Drafting/Review of AML policy & Procedure
  • Assistance in Customer screening
  • Support in submission of questionnaire of Annual AML/CFT Risk Assessment

UBO (Ultimate Beneficiary Ownership)

The UAE issued Cabinet Resolution No. 58 of 2020 (which came into force from 28th Aug’20) on the Regulation of the “Procedures Related to Real Beneficiaries”. The Resolution has standardized the requirement for a Beneficial Ownership register and unified the minimum disclosure requirements for corporate entities incorporated in the UAE mainland and in the non-financial free zones.

The Regulation’s one objective is to lift the corporate veil and attach atleast one natural person as a Real Beneficiary for every Legal person. In simple terms, a Real Beneficiary is a person who has Direct or indirect ownership of shares or equity of the Legal Person's Capital at 25% or more.

If any Entity is found to be in violation of the Regulations, one or more sanctions may be imposed by the Ministry or the Registrar.

What you need to do?

  • Identify the UBOs
  • Maintain Real Beneficiary Register
  • Maintain Register of Shareholders/ Partners

We provide the below range of services to assist you and make your business a compliant one:

  • Analyzing the existing structuring and preparing the list of UBOs
  • Secretarial Services related to maintenance of updated Real Beneficiary Register/ Shareholder or Partners registers
  • Filing of relevant forms