To determine whether the UAE Economic Substance Regulations apply to your ADGM entity and whether you have any reporting obligations, the following assessment needs to be taken for every financial year as the answer (and therefore required steps) can change from one financial year to the next:
Step 1: Did the entity carry out a Relevant Activity during the financial year?
No --> Substance regulations do not apply.
Step 2: Did the Licensee generate income from the Relevant Activity during the financial year?
No --> File the annual notification within 6 months of the financial year end but does not need to establish economic substance or file a full report demonstrating substance.
Yes --> Will need to file the annual notification. Move to Step 3 to determine if additional obligations apply.
Step 3: Is the Licensee an Exempted Company?
No --> The entity will need to file the annual notification and will also need to establish economic substance. Move to Step 4.
Yes --> File the annual notification but economic substance does not need to be established. No additional reporting requirements.
Step 4: Review the Economic Substance Test applicable to the Relevant Activity carried out by the Licensee
The Economic Substance Report will need to be filed within 12 months of the end of the Licensee's financial year. This report needs to provide evidence of the Licensee's financial and operational connection with the UAE. The exact requirements will depend on the Relevant Activity carried out by the Licensee.