Economic Substance Notification Due Date Declared for Dubai Silicon Oasis Authority (DSOA)

Economic Substance Notification (ESR Notification) due date declared for Dubai Silicon Oasis Authority (DSOA)

Economic Substance Notification (ESR Notification) due date is now declared for one more Regulatory in the UAE. Dubai Silicon Oasis Authority (DSOA) one of the Regulatory Authority has published the due date to file the Economic Substance Notification (ESR Notification). As per the guidance issued by DSOA, all the licensees in the DSOA that undertakes the Relevant Activities have to file the Economic Substance Notification (ESR Notification) on or before 31^st May 2020 and comply with the Economic Substance Regulations in UAE (ESR UAE).

If any licensee fails to comply with Economic Substance Regulations in UAE (ESR UAE) which is the requirement of filing the Economic Substance Notification (ESR Notification), then such Licensee may have to face Penal Consequences as provided in Article 11 of the Cabinet Resolution No. 31 of 2019. The penalty of Non-Compliance for Economic Substance Regulations in UAE (ESR UAE) ranges from AED 10,000 to AED 50,000 in the first year and for the subsequent non-compliance, it ranges from AED 50,000 to AED 300,000. The guidance of Economic Substance Regulations in UAE (ESR UAE) also states that providing incorrect or false information may also lead to penalties and other consequences.

What is Economic Substance Regulations in UAE (ESR UAE)?

 Economic Substance Regulations in UAE (ESR UAE) vide Cabinet of Ministers Resolution No 31 of 2019 is effective in the UAE from the year 2019. This Regulation is applicable to all companies registered in the UAE onshore, Free Zone & Financial Free Zone conducting Relevant Activities. The businesses in the UAE will now have to prove their Economic and Substantial existence in the UAE and have to apply the substance over form approach. As per Article 8 of this regulation the Licensees need to file Economic Substance Notification (ESR Notification) and Return with its Regulatory Authority within the declared due dates. Please note this Economic Substance regulation in UAE (ESR UAE) is not applicable to all the businesses. It is applicable to those licensees carrying out Relevant Activity.

What are the Relevant Activities under Economic Substance Regulations (ESR UAE)?  

As per Cabinet Resolution No. 31 of 2019, Relevant Activity means following:

1. Banking Business
2. Insurance Business
3. Investment Fund Management Business
4. Lease-Finance Business
5. Holding Company
6. Headquartered Business
7. Shipping Business
8. Intellectual Property Business
9. Distribution & Service Centre Business

Relevant Activities under Economic Substance Regulations (ESR UAE)

So, the entities must submit the Economic Substance Notification (ESR Notification) to the Authority whether or not they carry out any of the above mentioned Relevant Activity. Whether the licensee carries out the Relevant Activity or not needs to be assessed by the licensee. Further, it is to be noted that if the Licensee is carrying out the activities which are not mentioned in the license issued by DSOA but in substance falls in the category of Relevant Activity, the licensee will have to notify the Authority that it is carrying out the Relevant Activity.

What is to be notified?

As provided in the guidance by DSOA, All licensees undertaking relevant activities are required to file Economic Substance Notification (ESR Notification). The Economic Substance Notification (ESR Notification) will include the following:

·         the Licensee's financial year-end;

·         whether or not the Licensee exercises a Relevant Activity;

·         whether or not the Licensee earned any income from the Relevant Activity;

·         whether any income generated by the Relevant Activity is subject to tax outside the UAE.

Economic Substance Notification (ESR Notification) will include

How can Emirates Chartered Accountants Group Support you with Economic Substance Regulations in UAE (ESR UAE)?

 We Emirates Chartered Accountants Group have a specialized team on the Subject to support and guide you on the Compliance with Economic Substance Regulations in UAE (ESR UAE) with the following roadmap:

Phase I:  

 To study your Business Activities in detail and assess the applicability of Economic Substance Regulations in UAE (ESR UAE) on your activities. Also, to provide support and guidance on filing a notification with the Relevant Authority. Detailed Assessment is very important to identify whether the Activities fall in the definition of relevant Activity. Providing incorrect information may lead to penal consequences hence assessment should be done correctly.

Phase II: 

 To provide the guidance and support for compliance with the provisions of the Regulation, if your activity is falling under the regulation. To conduct Impact Study and Gap Analysis in order to assess whether the Business meets the Compliance test and to provide the recommendations.

Phase III:

Reporting with Relevant Authority on or before the Due Date. At Emirates Chartered Accountants Group, we have quality-driven professionals who are well versed with practical knowledge of assisting businesses with the applicability of Economic Substance Regulations in UAE (ESR UAE) & Bahrain. They shall help you determine the applicability of this law and support you with Economic Substance Notification for your business.

For any enquiry and support on Economic Substance Regulation,

you can reach out:

CA Dhara Yagnik, M.Com, ACA
dhara@emiratesca.com                                 
+971565956836    

CA. Manu Palerichal, FCA, CMA
manu@emiratesca.com
+971502828727