23 Feb 2023
09 Jan 2023
The Economic Substance Regulations, which is also known as “ESR” was formally introduced to the United Arab Emirates through Cabinet of Minister Resolution No. (31) of 2019, on 30th of April 2019. The aforementioned regulation aims to combat harmful tax practices while complying with the global standards. Similarly, the Ministry of Finance introduced the so-called “Relevant Activities” which plays a vital function in complying with the Economic Substance Regulation.
Entities carrying out Relevant Activities shall demonstrate their Economic Substance here in the UAE and comply with the submission of the notification and Economic Substance Report to their Regulatory Authorities. The Relevant Activities are as follows:
A revised legislation overhauling the ESR has been issued by the UAE this 2020. The amendment in the ESR UAE was formally introduced through Cabinet of Minister Resolution No. (57) of 2020 on 10th of August 2020. The ESR guidelines was similarly updated through Ministerial Decision No. (100) of 2020 on 19th of August 2020.
Changes in the Amended ESR:
The Amended ESR points out the following changes:
An entity which will fall under Exempted Licensee is still eligible in submitting the ESR Notification, providing with sufficient evidence of becoming an Exempted Licensee.
The amended Economic Substance Regulations confirm that ESR notifications must be filed within six months of the Licensees financial year-end.
Similarly, businesses that already submitted the ESR to their Regulatory Authorities will be required to do the re-submission of their notification on the Ministry of Finance portal. The guidance for the resubmission is not yet confirmed.
All the Economic Substance Reports must be submitted within twelve months from the end of the Financial year.
The amended Economic Substance Regulations verify that the filing will be done electronically on the Ministry of Finance Portal.
The re-submission of the notification for those who already conformed with the ESR submission will likewise be done after the portal goes live.
Update as of November 2, 2020: portal will be live by first week of December; deadline of notification and report is no later than 31st December 2020.
|Notifications due before the Ministry of Finance Portal goes live||Extended until 31 December 2020||Failure to submit the Notification along with the required supporting documents by 31 December 2020 will result to a penalty of AED 20,000.|
|Notifications previously filed||Licensees and/or Exempted Licensees that have submitted the ESR Notification to a Regulatory Authority before the Ministry of Finance Portal goes live (e.g. submitted last 30 June 2020) are required to resubmit their Notification by no later than 31 December 2020.||Failure to resubmit the Notification by the mentioned date would be subjected to a penalty of AED 20,000.|
|Economic Substance Reports due before the Ministry of Finance Portal goes live||The Economic Substance Reports for a Financial Year commencing on or after 1 January 2019 and ending on or before 31 December 2019 shall be submitted on 31 December 2020.||If applicable, failure to submit the ESR Report within the given period would be subjected to a penalty of AED 50,000.|
Licensees and Exempted Licensees shall ensure that the filing deadlines are met for both the Notification and the Economic Substance Report. All the above-mentioned penalties are under Article 13 and Article 14 of Decision 57 for failure to provide a Notification and for failure to provide Economic Substance Report, respectively.
08 Nov 2020