Economic Substance Notification Due Date for Businesses in DIFC

Economic Substance Notification Due Date for Businesses in DIFC

Economic Substance Notification (ESR Notification) due date is now declared for one more Regulatory in the UAE which is Dubai International Financial Centre (DIFC). DIFC is one of the Regulatory Authority as per the Economic Substance Regulation UAE (ESR UAE). DIFC in the UAE comes under top ten global financial centre also the leading financial hub in the Middle East, Africa and South Asia (MEASA) region.

What do you mean by Economic Substance Notification (ESR Notification)?

Economic Substance Notification (ESR Notification) means a notification which has to be filed by all the licensees who are falling under the purview of Economic Substance Regulation UAE (ESR UAE) within the due dates specified.

Should all the businesses in DIFC submit the Economic Substance Notification (ESR Notification)?

All businesses in DIFC conducting “Relevant Activity” as per Economic Substance Regulation UAE (ESR UAE) should mandatorily file the Economic Substance Notification (ESR Notification) on or before 12^th June 2020. The deadline which is mentioned for submitting Economic Substance Notification (ESR Notification) is for the financial year 2019.

Whether the deadline 12^th June 2020 is applicable to all entities in DIFC falling under the law?  

No. The deadline is applicable for those entities which are falling under this law during the Financial Year 2019 and their Financial year-end is 31^st December 2019. For example, if an entity’s Financial Year-end is 1^st October 2018 till 30^th September 2019, such entity need not file the  Economic Substance Notification (ESR Notification) on 12^th June 2020. The law will not be applicable for such companies between 1^st January 2019 till 30^th September 2019. The first applicable period for such an entity is 1^st October 2019 to 30^th September 2020. Hence such entity shall file the Economic Substance Notification (ESR Notification) on or after 30^th September 2020

What are Relevant Activities under Economic Substance Regulations UAE (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

The above mentioned are the Relevant Activities under Economic Substance Regulations UAE (ESR UAE) which means that if you are license holder in DIFC and conducting anyone or Relevant Activities in the Financial year 2019, mentioned above, you should file the Economic Substance Notification (ESR Notification) on or before 12^th June 2020.

The assessment of the Relevant Activity should be done by the licensee on whether they carry a Relevant Activity or not. The Regulatory Authority which is DIFC is not liable to conduct any assessment on the applicability of Economic Substance Regulations UAE (ESR UAE).

What is to be notified in your Economic Substance Notification (ESR Notification)?

Entities that fall under the purview of Economic Substance Regulations UAE (ESR UAE) should submit the Economic Substance Notification (ESR Notification) with the authority i.e, DIFC which may include the following mentioned information of your com

•  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 totally or partially subject to a tax system outside of the UAE; and
• whether or not the Licensee is exempt due to Government ownership.

 What are the penalties in cases of Non-compliance for Economic Substance Notification (ESR Notification)?

 If any licensee in DIFC does not comply with 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 for non-compliance of Economic Substance Regulations 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.

Further, failure by an Entity to comply with Economic Substance Regulations UAE (ESR UAE) can also result in Spontaneous Exchange of Information with Foreign Competent Authority and potential suspension, revocation or non-renewal of its registration.

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

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

Phase I:   

To study your Business Activities in detail and assess the applicability of Economic Substance Regulation (ESR) on your activities. Also, to provide support and guidance on filing Economic Substance Notification (ESR Notification) with DIFC.

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:

Economic Substance Reporting/Declaration with the DIFC Authority on or before the Due Date. Economic Substance Regulations UAE (ESR UAE) is applicable to all companies registered in the UAE, onshore & Free Zone (including Financial Free Zone) carrying out Relevant Activity. If businesses in DIFC are conducting businesses with the above-mentioned “Relevant Activities” in the UAE, then businesses in DIFC should determine the applicability Economic Substance Regulations UAE (ESR UAE) in their business and should analyze the implication of this new Economic Substance Regulations UAE (ESR UAE).

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 Regulation in the UAE & Bahrain. They shall help you determine the applicability of this law and support you with Economic Substance Notification for your business.

For your enquiries on Economic Substance Notification in the UAE

Contact Persons:

CA. Manu Palerichal
Email: manu@emiratesca.com
Mobile:+971 50 282 8727

CA. Dhara Yagnik
Email: dhara@emiratesca.com
Mobile: +971 56 595 6836