Senior Financial Analyst

Hello,

My query is in respect of the Economic Substance Regulations introduced in UAE in early Jan 2020. I need certain clarification on the scope of the relevant activity definition of Service Centre and Headquartered Business.

We have foreign group companies based in West Africa which are coming under the purview of the taxation of that particular country where they are carrying the business activities.

We have one free zone company registered with DAFZA who is registered for carrying out the activities of purchasing goods from the third party and selling it to the foreign group companies. The goods purchased from the third party supplier are not entering into UAE and are directly sold to foreign group companies on the vessel through transferring the ownership of the goods in the ship.

We are managing the financial risk, documentation, and order management relating to the purchase of the goods from a third party supplier.

Are we carrying out any relevant activity according to the above business model? If yes, will request to provide supporting documentation with your answer and to also let us know under which relevant activity (Service Centre / Headquarter Business) are we covered.

You can reach out to me for any of your further questions/ answers - +971-543362056.

Thanks and Regards

Ankit Kumar Jain

 

Replies
SAJITH NAIR10/12/2020 15:43:16

If you are only purchasing from third parties (and not group companies) and reselling the same (to a group company or 3rd party), the RA of Distribution Centre Business does not apply. In addition if you are providing any Consulting, Administrative or other services to a Foreign Group Company, you may fall under RA of Service Centre. To determine applicability of Headquarter business, mere coordination of the shipments as part of your trading business alone shouldnt be considered. The guidance requires to assess the same on the below criteria: 1) the provision of senior management; 2) the assumption or control of material risk for activities carried out by foreign group companies; or 3) substantive advice in relation to the assumption or control of such risks. So you need to evaluate whether your company provides above services to a Foreign Group Company.

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