The evidence required to establish economic substance in the UAE will vary depending on the Relevant Activity carried out by the entity.
Holding Company
A holding company for substance purpose is a business whose sole function is the acquisition and holding of shares or equitable interests in other companies and only earns dividends and capital gains from its equitable interests.
If a Licensee's activities are restricted to only carrying on a Holding Company Business, it satisfies the economic substance test if it:
complies with ADGM filing requirements; and
has adequate employees and premises.
UAE resident directors can be counted as full-time employees and a registered office provided by Clara is sufficient to show adequate premises.
Other Licensees
Licensees carrying on other Relevant Activities will satisfy the economic substance test if they:
carry out the core income generating activities (CIGA) for the Licensee in the UAE;
are directed and managed in the UAE;
have adequate number of qualified full-time employees who reside in the UAE;
incur adequate operating costs in the UAE; and
have adequate physical assets in the UAE.
"Directed and Managed" in the UAE is demonstrated by having an adequate number of Board meetings held in the UAE where a quorum of directors is physically presence and minutes of the meetings are prepared, signed and stored in the UAE.
CIGA, adequate employees, operating expenditure and physical assets can be outsourced to third party service providers or related companies in the UAE provided there is adequate oversight of the outsourced activities which should be documented in an agreement.
A Licensee that is classified as a High Risk IP Business for substance purpose has a higher burden of proof to demonstrate Economic Substance. In addition to the requirements for "Other Licensees" listed above, it must also provide evidence that:
it does, and historically has, exercised a high degree of control over developing and managing the IP;
it has a business plan explaining why the IP is held in the UAE; and
its decision making in respect of the IP takes place in the UAE.
When preparing the economic substance report, you will need to include (among other items):
Financial information (audited financials or management accounts) which show the income and operating expenditure of the Licensee
Ownership details, including UBO details
Information about the value of assets linked with the Relevant Activity.