It’s essential to know: New Economic Substance Requirements for UAE Companies.

Обновлено: 11 февр. 2020 г.

On September 11, 2019, the UAE Ministry of Finance published a new Decree № 215 on the issuance of special Directives to comply with the provisions of the Cabinet of Ministers Resolution №31 (dated April 31, 2019) as to the requirements for the economic presence (ESR) of UAE companies.

These Directives are intended to be used as guidance by the UAE for companies whose activitн fall under ESR rules and contain all the necessary requirements to comply with them.


The new rules were introduced by Resolution № 31 of the Cabinet of Ministers dated April 30, 2019. This document stipulates the need to ensure the economic presence of UAE companies depending on their type of activity.

Such requirements emerged in response to the actions of the European Commission, which resulted in putting the UAE's jurisdiction on the "black list" of the European Union. These provisions are analogical to the rules recently adopted in many offshore jurisdictions, and today they aim at implementation in the UAE.

All UAE companies will now have to verify their compliance with the requirements regarding their economic substance and, if necessary, take the necessary steps to ensure it.

Activities that fall under the new rules:

- banking activity;

- insurance activity;

- management of investment funds;

- leasing and financial activities;

- head office of a group of companies;

- shipping activities;

- holding activity;

- activities in the field of intellectual property;

- distribution activities and service centers.

The exception is the commercial companies that are directly or indirectly owned by the state by 51%.

Basic requirements

- the main business activity must be carried out from the territory of the UAE;

- the company must be managed from the UAE;

- availability of office and sufficient expenses for doing business in the UAE;

- availability of qualified full-time employees in the company office in the UAE.


The companies have to prepare and submit annual reports and confirmation of meeting substance requirements.

If a company uses outsourcing services to fulfill its substance in the UAE, it must demonstrate a proper level of external control over the functions outsourced to third parties.


The company will be subject to administrative fines of 10,000 to 300,000 Dirham annually if it fails to comply with the requirements.

Your further steps

Depending on the activity you are undertaking, it is necessary to determine if your company falls under the substance requirements (ESR).

If YES, and the company falls under these requirements, it is necessary to determine the level of compliance of your company with the new rules and, if necessary, to carry out all necessary measures to increase it, as well as to prepare the appropriate reporting.


Specialists of PARUS are always ready to advise you on all issues regarding the impact of the new rules, as well as to offer your business options to meet these requirements in the UAE.

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