Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
Further to the introduction of the economic substance regulations (“Regulations”) last year , the UAE Ministry of Finance (“MoF”) recently issued a guide on relevant activities and core-income generating activities (“Relevant Activities Guide”). The issuance of the Relevant Activities Guide follows the issuance of guidance on the economic substance requirements and the publication of FAQs by the MoF and the issuance of the cabinet resolution on determining regulatory authorities.
In the Relevant Activities Guide, the MoF has clarified that businesses should look beyond the commercial activities mentioned in the license or registration document in assessing whether they are carrying out a relevant activity.
Further, the MoF has indicated that core income generating activities (“CIGAs”) are activities that are of central importance to the licensee for the generation of gross income from its relevant activity.
The Relevant Activities Guide provided certain examples on CIGAs in respect of each relevant activity.
In addition to the obligation to submit an annual report, licensees are also required to notify their relevant regulatory authority on an annual basis as to whether they are carrying out a relevant activity. Previously, some regulatory authorities had announced deadlines for the filing of the notification. In light of the current COVID-19 situation, a few of these deadlines were extended.
We have outlined below the status of the notification filing deadline as announced by various regulatory authorities:
|Relevant Authority||Initial filing deadline||New filing deadline|
|Dubai Development Authority (DDA)||No announcement to date||No further announcement to date|
|Dubai Silicon Oasis (DSO)||31 March 2020||No further announcement to date|
|DMCC||30 June 2020||No further announcement to date|
|Dubai International Financial Centre (DIFC)||31 March 2020||12 June 2020|
|Abu Dhabi Global Markets (ADGM)||31 March 2020||30 June 2020|
|DAFZA||3 May 2020||No further announcement to date|
|Ajman Free Zone||30 June 2020||No further announcement to date|
|RAK Economic Zone||30 June 2020||No further announcement to date|
|RAK ICC||30 June 2020||No further announcement to date|
As the notification deadlines announced by many regulatory authorities are imminent and the first economic substance report is required to be submitted by 31 December 2020, there is very limited time for companies to assess the impact of the Regulations on their businesses. Any changes necessary to the operating models will also be required to be made before the submission of the first report in order to be compliant.
It is therefore critical for businesses in the UAE to commence preparations immediately and understand whether they are carrying out a relevant activity from a UAE economic substance perspective and consider whether any restructuring of its business operations should be undertaken to satisfy the economic substance test.
The failure to comply with statutory obligations under the Regulations has serious consequences and may result in the disclosure of the licensee’s information to foreign authorities, the imposition of an administrative penalty ranging from AED 10,000 up to AED 300,000 and the revocation, suspension or non-renewal of the existing license.
As the largest law firm in the Middle East and with strong corporate structuring and tax expertise and significant corporate structuring and tax experience across all industry sectors in the Middle East, we are well placed to assess the impact of the Regulations to your business, recommend and implement any changes required to your business structure to satisfy the economic substance test and assist you to comply with your notification and reporting obligations.
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