UAE CABINET DECISION NO. 58 OF 2020 REGULATIONS OF UBO
The United Arab Emirates issued Cabinet Resolution No. 58 of 2020 on the Regulation of the Procedures of the Real Beneficiary.
Applicability
The resolution applies to all companies in the UAE, except companies incorporated in the financial free zones like ADGM and DIFC and companies owned by the Federal Government and their subsidiaries.
What must companies do?
Companies need to maintain at their office premises:
• A shareholder register.
• A register of beneficial owners.
• A register of nominee directors.
Companies must submit the UBO declaration with licensing authorities
Ultimate Beneficiary or Real Beneficiary
For the Register of Real Beneficiary, a UBO can be defined as,
• Whoever owns or controls, through direct or indirect ownership, at least 25percent of the entity’s shares or whoever has a voting right of at least 25 percent of the shares.
• If no UBO is identified in accordance with the above, or there is any doubt that any natural person identified as a UBO is the true UBO, the natural person who exercises control over the entity through other means will be considered as the UBO.
• If none of the conditions above are met, then a natural person who is responsible for the senior management of the entity will be considered as the UBO.
How to Maintain the Register?
A UBO register must contains the following information without any limitation,
• Full name, nationality and date and place of birth, place of residence and address.
• Passport or ID number and date of issuance and expiry.
• Reason why the person is classified as UBO and date on which the person became a UBO or ceased to be a UBO.
Companies are required to keep the register updated and notify authority of any change or amendment to the information provided within 15 days of such change or amendment.
Non-Compliance
If companies are found to be non-compliant with the Regulations, the UAE Ministry of Economy may impose certain administrative sanctions.
How can we help?
• Prepare registers of the UBOs, Partners / Shareholders and Nominee Directors / Managers (if applicable), in accordance with the Resolution.
• Arrange filing with the authorities.
• Inform the relevant authority of any changes or amendments to the information provided.
Recent Posts
Business Valuation: Decoding The Strategic Worth Of An Enterprise
The global markets and innovation ecosystem are evolving. So are the global economies. As the demand for a level playing...
Read More
UAE E-Invoicing: FTA Announces Extension To ASP Deadline
In a digital-first economic landscape, countries with a first-mover advantage are rapidly becoming global innovation hub...
Read More
UAE Corporate Tax FTA Issues Clarification On Key Positions
With the businesses in the UAE expected to align their operations and structure to comply with the evolving corporate ta...
Read MoreImpact on Connected Persons Transactions
A key highlight of the clarification is the direct impact it has on transactions and payments made to shareholders, directors, officers, owners, and related parties that are involved with the business. This will include:
- Salaries and bonuses
- Management fees and consultancy payments
- Allowances, reimbursements and benefits
Reinforcing the fact that the deductibility of these payments will not be limited to just where they were incurred, but will also consider if they can be commercially justified. Businesses now would have to demonstrate if the commercial terms linked to the payment are in line with the market value conditions. But the FTA has also further detailed the conditionality that businesses have to meet before the transaction will be considered deductible. The conditions are:
- The expense is for genuine business purposes;
- The amount is commercially justifiable; and
- The value is at market level.
Any excess over market value may be disallowed for Corporate Tax purposes.
Conclusion
For every business to properly function, it has to ensure that it maintains supporting documents for its decisions. The clarification by the FTA about Article 36 of the UAE Corporate Tax Law further puts this point into the spotlight. With respect to the market value, businesses are now expected to maintain documentation such as:
- Employment and service agreements
- Board resolutions
- Benchmarking and salary studies
- Job descriptions and role clarity
- Evidence of services rendered
The clarification becomes more than just a guideline that clarifies the terminologies. It shapes the corporate tax structure with the broader principle of substance over form.