THE HELP CENTER

Find Answers to Important Questions

Why has the UAE introduced Economic Substance Regulations?

In April 2019, the UAE issued Cabinet of Ministers Resolution No. 31 of 2019 concerning Economic Substance (“Resolution 31") as part of its 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.
On 10 August 2020, the Cabinet of Ministers issued Resolution No.57 of 2020 Concerning Economic Substance Regulations (“Resolution 57"). Resolution 57 amends and repeals Resolution 31, Cabinet of Ministers Resolution No. 58 of 2019, and Cabinet of Ministers Resolution No. 7 of 2020. Following the issuance of Resolution 57, H.E. the Minister of Finance issued new Guidance by way of Ministerial Decision No. 100 of 2020, which also includes an updated Relevant Activities Guide appended as Schedule 1 (“Ministerial Decision 100").
The Regulations require UAE onshore and free zone companies and certain other business forms that carry out certain activities (Licensees - See Question 5) to maintain and demonstrate an adequate “economic presence" in the UAE relative to the activities they undertake. The purpose of the Regulations is to ensure that UAE entities report actual profits that are commensurate with the economic activity undertaken within the UAE.
Resolution 57 and Ministerial Decision 100 (collectively, the “Regulations") have been prepared in consultation with the Organisation for Economic Cooperation & Development ('OECD') and the European Union ('EU').

Who is subject to the Economic Substance Regulations?

The Regulations apply to Licensees that carry out any of the following Relevant Activities.
● Banking Businesses
● Insurance Businesses
● Investment Fund Management Businesses
● Lease-Finance Businesses
● Headquarter Businesses
● Shipping Businesses
● Holding Company Businesses
● Intellectual Property Businesses
● Distribution and Service center Businesses

Who needs to submit a Notification and by when?

Licensees and Exempted Licensees that undertake a Relevant Activity (irrespective of whether the Licensee or exempt Licensee has earned income from the Relevant Activity during the financial period) are required to file a Notification within six months from the end of the relevant financial period. All Notifications must be submitted on the Ministry of Finance filing portal.

Who needs to submit a Notification and by when?

Who should register for VAT?

Who should register for VAT?
A business must register for VAT if its taxable supplies and imports exceed AED 375,000 per annum.

It is optional for businesses whose supplies and imports exceed AED 187,500 per annum.

GAAP vs. IFRS: What's the Difference?

The primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based. This disconnect manifests itself in specific details and interpretations. Basically, IFRS guidelines provide much less overall detail than GAAP. Consequently, the theoretical framework and principles of the IFRS leave more room for interpretation and may often require lengthy disclosures on financial statements. On the other hand, the consistent and intuitive principles of IFRS are more logically sound and may possibly better represent the economics of business transactions.
Perhaps the most notable specific difference between GAAP and IFRS involves their treatment of inventory. IFRS rules ban the use of last-in, first-out (LIFO) inventory accounting methods. GAAP rules allow for LIFO. Both systems allow for the first-in, first-out method (FIFO) and the weighted average-cost method. GAAP does not allow for inventory reversals, while IFRS permits them under certain conditions

Who should register for VAT?

Who is required to register for Excise Tax?

The following groups are required to register for excise tax:
Producers of excise goods.
Importers of excise goods.
Stockpilers of excise goods.
Warehouse keepers supervising designated zones for Excise Tax purposes (where applicable).

Has the jurisdiction made a public commitment towards IFRS Standards as that single set of high-quality global accounting standards?

Yes. The UAE Commercial Companies Law No 2 of 2015, which came into force on 1 July 2015, requires all companies to apply international accounting standards and practices when preparing their accounts. The four main public securities markets in the UAE and their accounting requirements are as follows:

• NASDAQ Dubai. The listing rules of NASDAQ Dubai require listed companies to prepare IFRS Standards financial statements: http://www.nasdaqdubai.com/

• Dubai Financial Market PJSC. The listing rules of the Dubai Financial Market PJSC do not specify a specific accounting framework to be used in the financial statements of listed companies. IFRS are permitted and are used by most listed companies: http://www.dfm.ae. Some financial institutions use Financial Accounting Standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)

• Dubai Financial Services Authority (DFSA). The listing rules of the Dubai Financial Services Authority (DFSA) require all listed companies to prepare financial statements in accordance with IFRS Standards or other standards acceptable to the DFSA. The DFSA had permitted financial institutions to use the AAOIFI standards (see above). However in December 2012, the Dubai Financial Services authority (DFSA) prohibited Islamic financial institutions from using AAOFI. Companies that had applied AAOFI standards had a two year period to comply with IFRS Standards: http://www.dfsa.ae/Pages/DFSAlistingauthority/Checklists.aspx

• Abu Dhabi Securities Exchange. The listing rules of the Abu Dhabi Securities Exchange require IFRS Standards. Some government entities apply IPSAS