UAE has implemented ESR Regulations in 2019. The ESR Regulations are issued following the global standard set by the Organisation for Economic Co-operation and Development (“OECD”) Forum on Harmful Tax Practices and the European Union Code of Conduct Group (“EU COCG”), which lists specific requirements for businesses to demonstrate that their actual economic activity is in UAE, and it is not driven solely to benefit from a low or non-tax jurisdiction. Thus, preventing the harmful tax practice of profit shifting from high-tax jurisdiction to low tax regimes.

One of the requirements to demonstrate economic substance is that a Licensee undertakes the Core Income Generating Activities (CIGA) in relation to its Relevant Activity (or Relevant Activities) in the UAE. The CIGAs are those activities that are of central importance to the Licensee for the generation of the gross income earned from its Relevant Activity.