Introduction
Many business owners in the UAE ask: What are CIGAs? How is income under CIGAs treated? These questions arise because the Economic Substance Regulations (ESR) are now active. Companies must understand ESR rules and check if their business falls under Core Income Generating Activities (CIGAs).
ESR applies to many types of UAE companies including:
- Onshore and free zone companies
- Limited liability companies
- Private and public shareholding companies
- Joint venture companies
- Partnerships
If a business falls under ESR, it must submit notifications and reports each year. Failure to comply can result in penalties.
What Are CIGAs?
CIGAs mean Core Income Generating Activities. These are the tasks that generate gross income for a company under relevant activity. CIGAs must be performed in the UAE by staff present in the country. They include:
- Banking businesses
- Insurance businesses
- Investment fund management businesses
- Lease-finance businesses
- Headquarters businesses
- Shipping businesses
- Holding company businesses
- Intellectual property businesses
- Distribution and service center businesses
For example, if a company makes management decisions, they must be made in the UAE. Expenses and operations related to CIGAs should also take place inside the UAE.
Steps Taken by Companies with Income Under CIGAs
1. Classify and Structure Activities
Companies first classify their business activities. They check if income falls under CIGAs. Non-relevant or illegal activities are identified and corrected. Outsourced accounting services help businesses monitor compliance and file ESR notifications on time.
2. Perform Gap Analysis
Gap analysis shows the difference between the company’s current state and future goals. It answers questions like:
- Where is our business now?
- What are our goals in the next few years?
- How can we close the gap between present and future?
With professional accountants, companies can apply best practices and close gaps effectively.
3. Documentation of Financial Records
Maintaining financial records is mandatory. Transactions must be transparent and accurate. Proper documentation helps companies file ESR reports correctly. Accounting software also makes the process smooth and reliable.
4. Assess Income from Relevant Activity
Income from each CIGA is measured carefully. Expenses and assets are allocated based on operations in the UAE. Companies must ensure proper access to assets and accurate reporting of income.
5. Conduct Board Meetings with Quorum
After assessments, board meetings are conducted with directors physically present in the UAE. Findings are shared, opinions collected, and decisions recorded. Meeting minutes must be signed and stored for reference.
6. Monitor Bank Inflows and Audit Accounts
Account reconciliations help detect errors or fraud. Internal and external audits ensure financial accuracy. Audits confirm compliance with UAE law and international accounting standards.
7. Recruit Qualified Staff or Assess Current Staff
Companies identify the number of UAE-based employees needed for CIGAs. They also check qualifications and industry experience. Outsourced services such as payroll, accounting, and VAT must be supervised through agreements.
Role of Mubarak Al Ketbi (MAK) Auditing in CIGAs Compliance
Mubarak Al Ketbi (MAK) Auditing helps companies meet ESR requirements. Our team guides businesses to classify activities, maintain financial records, and prepare ESR reports. We also conduct gap analysis, perform audits, and ensure compliance with UAE laws.
Our services include:
- Accounting and bookkeeping
- VAT consultancy and filing
- CFO support services
- Management accounting
- Financial auditing
With our expertise, businesses stay compliant, avoid penalties, and manage CIGA income properly.
What Can Help
Mubarak Al Ketbi (MAK) Auditing supports companies in handling CIGAs income and ESR compliance. We guide businesses in accounting, tax, and financial reporting. With our expertise, your company avoids penalties and stays compliant. Remember, “An ounce of prevention is worth a pound of cure” — taking steps today saves major costs tomorrow.
đź“Ś Contact Information
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact/WhatsApp: +971 50 276 2132
