The key impact of the Resolution is the obligation of companies carrying out relevant activities to meet the specified Economic Substance requirements and to conduct annual compliance reporting. Non-compliant companies could risk fines and penalties, suspension, withdrawal or non-renewal of licenses, and the disclosure of their position to other foreign authorities. Companies in the UAE carrying out the relevant activities must file their first report within 12 months from the end of their fiscal year.

Why has the UAE issued the Resolution?

In March 2019, the European Union (EU) published an updated list of non-cooperative tax jurisdictions (the EU blacklist), which included the United Arab Emirates (UAE) for not delivering on its commitment “to comply with the EU’s good governance criteria”. Since then the UAE has issued new legislation under Cabinet Resolution No. 31 of 2019 (the Resolution) which specifies the requirements for companies to have economic substance or a presence in the UAE. Although the Resolution was published on 19 June 2019, compliance with the requirements has been in force since 30 April 2019.

Which entities does the Resolution apply to?

Under the Resolution, the Economic Substance requirements apply to companies that generate income by carrying out the following relevant activities in the UAE, whether onshore or in the free zones including financial free zones:

  • Banking;
  • Insurance services;
  • Investment fund management;
  • Finance leasing;
  • Headquarter activities related to (i) conducting management decisions, (ii) incurring operational expenditures on behalf of group entities, and (iii) coordinating group activities;
  • Shipping;
  • Intellectual property services;
  • Holding company activities; and
  • Distribution and service center activities provided to non-UAE related persons including (i) transporting and storing spare parts, materials or ready-for-sale goods, (ii) managing inventories (iii) taking orders, and (iv) providing consulting or other administrative services.

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To speak to us in relation to any corporate structuring and tax issues in the UAE and Middle East, please feel free to contact one of the lawyers below, or your usual Baker McKenzie contact.


Omar Momany is the Head of the UAE Corporate & Commercial practice of Baker McKenzie Habib Al Mulla, based in Dubai. With over 15 years' experience in the Middle East, Omar focuses on public and private mergers and acquisitions, corporate restructurings, corporate governance, joint ventures, commercial matters and corporate/shareholders' disputes in the UAE and throughout the region.


Rony Eid is a counsel in Baker McKenzie Habib Al Mulla, based in Dubai. With over 18 years' experience in the Middle East (including nine years in the UAE), he specializes in corporate and commercial transactions, foreign direct investments, mergers and acquisitions, reorganization of companies and regulatory matters. Rony also advises on the incorporation and structuring of companies in the UAE including within Dubai's free zones.


Reggie Mezu is a Senior Special Counsel in Baker McKenzie Habib Al Mulla, based in Dubai. He has practiced tax for nearly 30 years in the Middle East, Africa and Europe, including in the UAE for 15 years. Reggie regularly advises clients on tax planning, corporate structuring, cross-border transactions, double tax treaties, reform and development of fiscal frameworks, general advice, and most recently, the new value added tax (VAT) regime in the Gulf region.


Bastiaan Moossdorff is a Senior Associate in Baker McKenzie Habib Al Mulla, based in Dubai. He specializes in indirect tax and has practiced indirect tax for more than 7 years in the Netherlands, the UK, the UAE and the KSA. Bastiaan has multi-jurisdictional and multi-disciplinary academic qualifications in law, accountancy and taxation.

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