Most small businesses, if they are part of a foreign group, will probably perform either distribution or service center business activities. For this reason, and as an example, here is a brief explanation of these Relevant Activities.
A UAE entity is considered engaged in a Distribution Business if it is Purchases goods or materials from a foreign group company and distributes or sells those goods inside or outside the UAE (even if the goods are directly dispatched to the customer by the foreign group company).
A UAE entity is considered engaged in a Service Centre Business if it is provides consulting, administrative, or other services to a foreign group company. Let’s discuss with an example, if a subsidiary in the UAE provides services for its parent company in Germany, it would be considered as a service center business (a Relevant Activity). Hence, the subsidiary is subject to the Economic Substance Regulations.