General UAE Legal Questions LawCabinet Resolution No. (57) of 2020 Specifying the Requirement's of Real Economic Activities

Article (1) Definitions In application of the provisions of this Resolution, the following words and phrases shall have the meanings assigned to each, unless the context indicates otherwise: State : The United Arab Emirates. Banking Operations : Shall have the meaning specified by the Law regulating these operations in the State. Working Day : Days of the week from Sunday to Thursday, except official

-- 2 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activities 3 holidays. Document : Any document that: a. Relates to the exercise of a relevant activity by the licensee or the excluded licensee. b. Forms a part of any register pursuant to any legislation app…

Article (2) Resolution Objectives This Resolution aims at specifying the requirements the licensee should abide by and putting the standards that confirm that the licensee exercises a commercial activity in the State that is an real economic activity.

Article (2) BIS Scope of Application The provisions of this Resolution shall apply to fiscal years commencing from 01/01/2019 up to and including the fiscal year ending on 31/12/2022.

Article (3) Relevant Activity and Activity Generates a Main Income 1. For purposes of this Resolution, the relevant activity shall be one of the following activities: a. Banking operations. b. Insurance operations. c. Operations of investment funds management. d. Finance leasing operations. e. Operations of the headquarters. f. Shipping operations.

-- 10 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activities 11 g. Holding company operations. h. Intellectual property operations. i. Operations of Distribution and Service Centre 2. The activities generating a main income are the main activities of the licensee important for generating an income from a rele…

Article (4) of this Resolution. Relevant Activity : Any of the activities stipulated in Article (3) of this Resolution. License : Commercial license or permission issued by the competent licensing authority in State including, free zone and financial free zone. Licensee : Any of the two following entities: a. Legal person (incorporated inside or outside state). b. Joint coalition that does not have the independent legal personality. It shall be registered in State, including the free zone and financial free zone, and shall carry out a relevant activity. Excluded Licensee : Any of the following licensees: a. Investment Fund.

-- 6 of 29 --

Cabinet Resolution of 2020 Specifying the Requiremen…

Article (4) Regulatory Authorities 1. Subject to this Resolution, each of the following authorities shall be appointed as a Regulatory Authority for regulating the following relevant activities and for purposes of this Resolution: a. Banking operations: 1. The Central Bank. 2. Financial free zone authority with regard to banking operations exercised in the financial free zone. b. Insurance operations: 1. The Insurance Authority. 2. Free zone authority with regard to insurance operations exercised in the free zone. 3. Financial free zone authority with regard to insurance operations exercised in the financial free zone. c. Operations of investment funds management: 1. The Securities and Commo…

Article (5) National Authority for Evaluation Subject to this Resolution, the Federal Tax Authority shall be appointed as the National Authority for Evaluation, which shall exercise the duties entrusted thereto pursuant to this Resolution, including: 1. Deciding whether the licensee or excluded licensee has fulfilled the requirements of real economic activities in accordance with provisions of Article (7) of this Resolution. 2. Applying the administrative fines stipulated in accordance with provisions of Articles (13), (14) and (15) of this Resolution. 3. Considering the grievances and deciding thereon in accordance with provisions of

Article (6) Requirements of Fulfilment of Real Economic Activities 1. Subject to provisions stated in Clauses (5), (6) and (7) of this Article, save the excluded licensee, the licensee should fulfil the standards determined below for fulfilling the requirements of realizing the real economic activities with regard to any relevant activity exercised thereby: a. If the licensee exercises an activity that generates a main income in the State. b. If the relevant activity is directed and managed in the State. c. Taking the level of relevant activity into account as follows: 1. There should be a sufficient number of full-time qualified employees working in this activity and are already in the Stat…

Article (7) Evaluation of Fulfilment of Requirements of Real Economic Activities 1. The National Authority for Evaluation may decide that the licensee has not fulfilled the requirements of real economic activities during any fiscal year of the licensee, provided that such decision should be taken within maximum (6) six years from the end of the fiscal year relevant to the decision. 2. The period stated in Clause (1) of this Article shall not be applicable if the National Authority for Evaluation could not take a decision within (6) six years due to a gross fault, cheating or fraud made by the licensee or any other person. 3. For the purposes of Clause (1) of this Article, the National Author…

Article (8) of this Resolution. Finance Leasing Operations : Shall have the meaning specified by the Law regulating these operations in the State. National Authority for Evaluation : Federal Tax Authority entrusted in accordance with provisions of Article (5) of this Resolution. Regulatory Authority : Authority or authorities entrusted to regulate any activity related to purposes of this Resolution, as specified in

Article (8) Requirement of Information Provision 1. Each licensee and excluded licensee should send a notice to the Regulatory Authority each year clarifying the following: a. The relevant activity exercised by the licensee or excluded licensee within the concerned fiscal year. b. Whether an income is generated from a relevant activity within the concerned fiscal year.

-- 18 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activities 19 c. Date of start and end of the fiscal year. d. Any other information or documents requested by the Regulatory Authority. 2. In addition to the notice mentioned in Clause (1) of this Article, the excluded licensee should prov…

Article (9) Provision of Information by Regulatory Authority 1. When the Regulatory Authority receives the notice and the real economic activities report under this Resolution, it should send the notice, the real economic activities report and all relevant documents, according to provisions of this Resolution, to the National Authority for Evaluation within thirty (30) working days from receiving them. 2. If the licensee and excluded licensee fail to provide the notice or the real economic activities report or any document or information connecting to any of them and it should be provided according to this Resolution within the period determined under this Resolution, the Regulatory Authorit…

Article (10) Provision of Information by National Authority for Evaluation 1. Subject to the right of the licensee to submit grievance according to provisions of Article (17) of this Resolution, if the National Authority for Evaluation decides subject to Article

-- 21 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activities 22 (7) of this Resolution that the licensee has not fulfilled the requirements of real economic activities for a specific fiscal year, it shall notify the competent authority of this Resolution and provide it with the information stipulated in Article (8) of this Resolution and any other information relevant to that licensee that may b…

Article (11) Exchange of Information by Competent Authority 1. When the competent authority receives information from the National Authority for Evaluation informing that the licensee has not fulfilled the requirements of real economic activities for certain fiscal year subject to Clause (1) of Article (10) of this Resolution, the competent authority, subject to the provisions of an international agreement or convention or any other similar international arrangement to which the State is a party, shall provide the relevant information concerning this licensee to the foreign competent authority in the country where the parent company, ultimate parent company and the beneficiary from the capit…

Article (12) Cooperation of Other Governmental Bodies 1. All ministries and other governmental authorities, whether federal or local, should provide the Regulatory Authority and National Authority for Evaluation and/or competent authority with any details, information or documents it acquires concerning a licensee or an excluded licensee upon a request from these authorities. 2. All ministries and other governmental authorities, whether federal or local, should cooperate with the Regulatory Authority and National Authority for Evaluation and/or competent authority in order to enforce the provisions of this Resolution, including the determination of quarters of inquired licensee or excluded l…

Article (13) Administrative Fine and Violation on Non-Submission of Notice 1. An administrative fine of twenty thousand Dirham (AED 20.000) shall be applied for the licensee or excluded licensee fails to submit the notice (and any relevant information or documents) pursuant to provisions of this Resolution. 2. If the National Authority for Evaluation decides that the licensee or excluded licensee has committed one of the violation stipulated in Clause (1) of this Article for certain fiscal year, it shall notify him of the following: a. The National Authority for Evaluation decides that he has not submitted the notice according to provisions of this Resolution for this fiscal year.

-- 24 of…

Article (14) Administrative Fine and Violation on Non-Submission of Real Economic Activities Report and Non-Fulfilment of Requirements of Real Economic Activities 1. An administrative fine of fifty thousand Dirham (AED 50.000) shall be applied to the licensee or excluded licensee if he commits any of the two following violations: a. Failure to submit the real economic activities report (and any relevant information or documents) according to provisions of this Resolution. b. Failure to fulfil the requirements of real economic activities for any fiscal year. 2. If the National Authority for Evaluation decides under Article (7) of this Resolution that the licensee or excluded licensee did not…

Article (15) Administrative Fine and Violation on Submission of Inaccurate Information 1. An administrative fine of fifty thousand Dirham (AED 50.000) shall be applied to the licensee or excluded licensee if he submits inaccurate information to the National Authority for Evaluation, knowing they are inaccurate when submitting them and did not notify the Regulatory Authority or the National Authority for Evaluation upon discovering their inaccuracy after submitting them. 2. If the National Authority for Evaluation decides that the licensee or excluded licensee has committed one of the violation stipulated in Clause (1) of this Article for certain fiscal year, it shall notify him of the follow…

Article (15) of this Resolution, the administrative fine may not be applied after twenty (12) months from the date the National Authority for Evaluation is aware of such violation. 3. Provisions of the period mentioned in Clauses (1) and (2) of this Article shall not apply if the licensee or excluded licensee has committed fraud that led to not enable the National Authority for Evaluation to apply the administrative fine thereto within the period specified in Clause (1) of this Article or to authorize him to pay it within the period specified in Clause (2) of this Article.

Article (16) Period of Application of Administrative Fine to Violation 1. Without prejudice to provisions of Clause (2) of this Article, it is not permissible to apply any administrative fine under this Resolution after six (6) years as of the date of committing the violation necessitating such administrative fine. 2. If the licensee or excluded licensee is responsible for paying an administrative fine under

Article (17) of this Resolution. 4. Meeting the requirements of report in accordance with provisions of Article (10) of this Resolution.

-- 15 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activities 16 5. Carrying out any other duties required for enforcing the provisions of this Resolution. 6. Carrying out any duties required for enforcing any resolution issued by the Minister of Finance in accordance with this Resolution.

Article (17) Right to Appeal the Administrative Fine 1. Any licensee or excluded licensee may appeal to the National Authority for Evaluation against its decision on applying the administrative fine thereto for any of the following reasons: a. He did not commit the administrative violation attributed thereto. b. The administrative fine applied thereto is not commensurate with the violation. c. The applied administrative fine exceeds the limit prescribed for the committed violation according to this Resolution. 2. The National Authority for Evaluation shall issue a decision specifying the appeal

-- 27 of 29 --

Cabinet Resolution of 2020 Specifying the Requirements of Real Economic Activitie…

Article (18) Date of Payment of Administrative Fine Any administrative fine shall be paid subject to this Resolution before or on any of the following two dates, which is earlier: 1. The date on which the administrative five is due pursuant to the notice issued by the National Authority for Evaluation subject to provisions of Articles (13), (14) and (15) of this Resolution. 2. In case of appealing the decision subject to Article (17) of this Resolution, the date shall be the date on which the appeal is decided or withdrawn.

Article (19) Power to Access the Work Headquarters and to Examine Business Documents 1. Any employee authorized by the Regulatory Authority and National Authority for Evaluation may examine any business document found in the work headquarters and may obtain a copy of such document. 2. Any employee authorized by the Regulatory Authority and National Authority for Evaluation may access to the work headquarters at the official working hours to exercise the powers specified in Clause (1) of this Article. 3. Powers specified in Clauses (1) and (2) of this Article shall be exercised only for the purposes of any administrative investigation conducted by the Regulatory Authority or the National Auth…

Article (20) Executive Resolutions The Minister of Finance shall issue the necessary resolutions to implement any of provisions of this Resolution.

Article (21) Repeals The Cabinet Resolution No. (31) of 2019, as amended, and Cabinet Resolution No. (58) of 2019 mentioned shall be repealed, as well as any provision violates or contradicts the provisions of this Resolution.

Article (22) Publication and Enforcement of Resolution This Resolution shall be published in the Official Gazette and shall come into force as of the date it is issued. Mohammed Bin Rashid Al Maktoum Prime Minister Issued by us: Date: 20 /Dhul-Hijah/ 1441 H Corresponding to: 10 /August/ 2020

-- 29 of 29 --