Headquarters Business is the business of providing any of the following services toone or more Foreign Connected Person:
- the provision of senior management
- the assumption or control of material risk for activities carried out by, or assets owned by, and Foreign Connected Person: or
- the provision of substantive advice in connection with the assumption or control of risk
Core Income Generating Activities
- Taking relevant management decisions
- Incurring operating expenditures on behalf of a Group
- Coordinating Group activities
Special Points to Consider
- A Licensee’s position in a group’s corporate structure is not relevant for determining whether it is engaged in a Headquarters Business.
- The Licensee does not need to be the direct or ultimate parent of a group company for it to be considered a Headquarters Business.
- Whether an entity carries on a Headquarters Business is entirely dependent on the nature of the services it provides to foreign group companies.
- For Banking, Insurance, Investment Fund Management, Lease-Finance, Shipping or Distribution and Service Centre Businesses, it may be a normal part of their activities to provide headquarters services. To prevent duplicate reporting, such Licensees are not also considered engaged in a Headquarters Business, and will not need to separately demonstrate economic substance in respect of such activities.
Regulatory Authority
- Ministry of Economy
- Competent Authority in Financial Free Zone
- Competent Authority in Free Zone
What Licensee has to do?
- File notification with the regulatory authority before due date.
- Only Licensees that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an economic substance return. Economic substance returns must be filed within 12 months from the end of the relevant financial period.
Who has to file the Notification?
The provisions shall apply to a Licensee that carries out any Relevant Activity. However, the notification form will be the way to confirm to the “Regulatory Authority” whether your company has carried out any relevant activity during the reportable financial year or not.
Hence, filing of notification is mandatory for all the Licensees and Exempted Licensees.
Consequences due to Failure to Comply with Regulations
- Penalties between AED 20,000 to 400,000
- Exchange of information with foreign competent authority
- Suspension or withdrawal or cancellation of license