All the entities which are holding a trade license in the UAE (particularly the free zone and offshore entities) are required to notify their concerned Regulatory Authorities regardless if they are carrying out the Relevant Activities within the UAE or not. Aside from notifying the Relevant Activities to the Regulatory Authority, providing the information with reference to the Licensee also serves as the main purpose of the ESR Notification. All the information provided in the ESR Notification is highly required in filing the Economic Substance Report for the same period.
The Submission of the ESR Notification
An entity which is conducting one or more Relevant Activities is therefore regarded as a "Licensee."
The filing of the ESR Notification is a must to those entities which are carrying out the Relevant Activities within the UAE during the relevant Financial Year. Such entities are as follows:
A Corporate Entity
Limited Liability Company
Public Joint Stock Company
Private Joint Stock Company
Limited Liability Partnership
ESR Notification Filing
ESR Notification Filing for an entity which carries out a relevant activity for part of the year If the entity is carrying out a Relevant Activity for part of the year, it is responsibility of the Licensee to notify its Regulatory Authority concerning all the conducted Relevant Activities during the financial years, regardless of whether it is not conducted throughout the entire year.
ESR Notification Filing for a Multiple Licensee A single notification is not eligible for a multiple Licensee. It is clearly mentioned by the authority that each Licensee must file a notification on a stand-alone basis. This is regardless of whether the Licensee is part of a consolidated group for accounting or VAT purposes.
ESR Notification Filing for the UAE Parent Company with UAE Branches For the UAE parent company/head office, it is their obligation to notify their Regulatory Authority regarding their Relevant Activities as well as the Relevant Activities of their UAE branches. This is applicable regardless if the UAE parent company/head office is carrying out their own Relevant Activities or not.
ESR Notification Filing for a Licensee which is in the process of Liquidation A Licensee which is in the process of Liquidation and probably carries out a Relevant Activity in the year of Liquidation must be able to comply with the filing of their ESR Notification and Economic Substance Report (where applicable) for the period up to liquidation.
Deadline for ESR Notification
The Notification must be filed within six months from the Licensee's financial year-end.
The Ministry of Finance Portal will go live by the first week of December, while the deadline of notification is no later than 31st December 2020.
Penalties for Failure to provide a Notification
If the Licensee or Exempted Licensee failed to submit the Notification before the deadline means the Licensee or Exempted Licensee is subject to administrative penalty of dirhams twenty thousand (AED 20,000).
If the Licensee or Exempted Licensee provides inaccurate information to the Regulatory Authority or the National Assessing Authority and knows of the inaccuracy at the time the information is provided but fails to inform the above-mentioned authorities means the Licensee or Exempted Licensee is subject to a penalty amounting to dirhams fifty thousand (AED 50,000).
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