Economic Substance Regulation UAE | ESR Reporting Dubai, UAE
Economic Substance Regulation UAE
Emirates Chartered Accountants Group - UAE Economic Substance Regulation(ESR) Advisory and ESR Filing Services in Dubai, UAE.
Call for Consultation
CA Dhara Yagnik I Consultant
Mob: +971 56 5956836
Email: dhara@emiratesca.com
Relevant Activities under UAE Economic Substance Regulations
- Banking Business
- Insurance Business
- Investment Fund Management Business
- Intellectual Property Business
- Lease-Finance Business
- Shipping Business
- Headquarters Business
- Holding Company Business
- Distribution & Service Centre Business
Exempt Licensee as per Cabinet Resolution 57/2020
The Scope of Exempted Licensee as per Cabinet Resolution No. 57/2020 is extended. Following entities fall in Exempted Licensee:
- An Investment fund
- A licensee that is Tax Resident in a Jurisdiction other than in the UAE
- A licensee that is wholly owned by one or more UAE Resident and meets the following conditions:
» An entity should not be part of MNE Group
» An entity should carry business only in the UAE - A licensee that is the branch of a foreign entity the Relevant Income of which is subject to tax in a jurisdiction other than UAE
How to meet the Economic Substance Test?
- Check whether the entity conducts/ performs Core Income-Generating Activity (CIGA) in the State.
- Check whether the entity is directed and managed in the State in relation to that activity.
- Check whether the company employs an adequate number of qualified full-time employees or incurs an adequate level of operating expenditure and adequate physical assets in the state.
- If CIGA is conducted by another entity for the relevant licensee, then check whether the Licensee has full control and is be able to monitor the activities of another entity.
Authorities as per CRN 57/2020:
I.Functions of Authorities as per ESR
1. Regulatory Authority:
- Collect information through Notification, Substance Report and supporting documents
- Review the information obtained from Licensee & Exempted Licensee
- Undertake assessment on the determination of Exempted Licensee
- Other functions as per Article 4 of the Cabinet Resolution 57/2020
2. National Assessing Authority:
- Federal Tax Authority is hereby appointed as National Assessing Authority
- To undertake assessments to determine the Economic Substance Test
- Impose the administrative penalties
- Hear and decide on appeals
- Other functions as per Article 5 of the Cabinet Resolution 57/2020
3. Competent Authority:
- Providing information of Licensee or Exempted Licensee that has not met Substance test to Foreign Competent Authority
- Providing information in relation to high-Risk IP Business Licensee to Foreign Competent Authority
- Such other functions as per the Resolution
Why is the Assessment of Activities important?
Assessing whether the Entity is engaged in Relevant Activity will determine whether the Entity is required to comply with Economic Substance Regulation in the UAE. The substance over form approach is to be considered in assessing the activities. It is significant to note that even Passive Income from any of the activity falling within the definition of relevant activity would require an entity to comply with the regulation. Going incorrect with the Assessment may lead to the filing of inaccurate information with the Authorities. This may further lead to penalties.
ESR Notification should be filed by all Licensee and Exempted Licensee annually providing the following details:
- Date of commencement and end of Financial Year
- Relevant Activity being carried
- Whether Revenue generated from such Relevant activity during relevant Financial year
- Other information as required by the Regulatory Authority
Exempted Licensee to also provide all the information and documents for claiming the status of Exempted Licensee.
Notification must be filed within 6months from the end of its Financial Year & ESR Report must be filed within 12months from the end of its Financial Year of the Licensee or exempted licensee. For e.g:
|
Financial Year-end |
ESR Notification on MoF Portal |
ESR Reporting on MoF Portal |
|
Dec 2019 |
Extended deadline by 31st Jan 2021 |
Extended deadline by 31st Jan 2021 |
|
31st Mar 2020 |
Extended deadline by 31st Jan 2021 |
31st Mar 2021 |
|
30th Jun 2020 |
Extended deadline by 31st Jan 2021 |
30th Jun 2021 |
|
30th Sep 2020 |
Extended deadline by 31st Jan 2021 |
30th Sep 2021 |
Penalties in case of non-compliance with ESR:
| Particulars | ESR Notification | ESR Reporting |
| Failure to submit before Due date | AED 20,000 | AED 50,000 |
|
Submission of Inaccurate or incorrect information |
AED 50,000 | AED 50,000 |
The penalty in case of failure to submit the notification
An administrative Penalty amounting to AED 20,000 shall be imposed on Licensee or Exempted Licensee who has failed to submit the notification or any information or document required to be filed
How Emirates Chartered Accountants can help you?
Our experts will conduct a preliminary check on your business on the applicability of Economic Substance Regulation.
How can Emirates Chartered Accountants Group support you for assessment on Economic Substance Regulation in the UAE?
- If Economic Substance Regulation is applicable for your company, then we support and guide you to check whether the criteria on the satisfaction of Economic Substance are met or not.
- If the criteria are not met, then identify the gaps. Providing suggestions and improvements to ensure the compliance of Economic Substance Regulation in the UAE.
- To assist the Licensee to file Information Notification with the Relevant Authorities.
