Holding Company Business is a business that
- has as its sole function the acquisition and holding of shares or equitable interests in other companies, and
- only earns dividends and capital gains from its equitable instruments
Core Income Generating Activities (CIGA)
The CIGAs of a Holding Company Business are all activities related to acquiring and holding shares or equitable interests in other companies, provided such activities do not constitute another Relevant Activity.
Special Points to Consider
- A Licensee whose activities are limited to being engaged in a Holding Company Business would only be required to meet the reduced economic substance requirements under Article 6.5 of the ESR Regulations
Reduced Economic Substance Requirement (article 6.5 of the Regulation are
Licensee meets the Economic Substance Test if it meets the following conditions:
• Complies with the requirement to submit any documents, records or information to
the relevant Regulatory Authority in accordance with the law applicable to the
Licensee in the State.
• Has adequate employees and premises for holding and managing the Holding
Company Business.
- A UAE business that does not meet the narrow definition of a Holding Company Business because it either:
(i) carries on another activity; and/or
(ii) owns other forms of investments or assets (e.g. interest-bearing loans)
may be required to meet the full economic substance requirements if the other activity or asset brings the UAE business within the scope of a different Relevant Activity category (e.g. Lease-Finance), and the Licensee derives gross income from such other Relevant Activity.
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.
Failure to comply with regulation:
- Penalties between AED 20,000 to 400,000
- Exchange of information with foreign competent authority
- Suspension or withdrawal or cancellation of license