The term “economic substance” refers to the requirement for a company
to have an actual economic and evidential presence in the jurisdiction
where it is registered, in order to qualify for select tax benefits.
In essence, the real purpose of the EU blacklist is to mitigate the
existence of tax regimes that facilitate offshore structures which
attract profits without real economic activity.
It is therefore crucial for UAE companies involved in international
operations to be aware of the concept of economic substance, to prevent
and counteract the risk of a potential question over its tax residency.