All the Licensees which derive Relevant Income from the Relevant Activities during a Reportable Period in the UAE are entitled to do their Economic Substance Report. The National Assessing Authority takes part in the submission of ESR Report. The National Assessing Authority, which is the Federal Tax Authority, must be provided with the information on the Licensee and the income, expenditure, assets, employees, and governance related to its Relevant Activities.
The Submission of the ESR Report
The following entities (not an Exempted Licensee) must file their Economic Substance Report:
A Corporate Entity
Limited Liability Company
Public Joint Stock Company
Private Joint Stock Company
Limited Liability Partnership
ESR Report Filing
ESR Report Filing for a Multiple Licensee As per the Ministry of Finance, each Licensee must file the Economic Substance Report on a stand-alone basis. This is regardless of whether the Licensee is part of a consolidated group for financial reporting, or VAT purposes.
ESR Report Filing for the UAE Corporate Entity with UAE Branches For the UAE Corporate Entity which has one or more UAE branches, it is their obligation to report their Relevant Activities as well as the Relevant Activities of their UAE branches in one composite ESR Report.
ESR Report Filing for Foreign Entity with UAE Branch For the Foreign Entity which has UAE Branch, it is not required for them to file the ESR Report of their UAE Branch as long as the UAE Branch is subjected and reported to tax jurisdictions in the foreign parent/head office.
ESR Report Filing for the UAE Entity which carries Relevant Activities under its Foreign Branch For the UAE Entity which carries Relevant Activities under its foreign branch or permanent establishment that is subject to tax in the foreign jurisdiction, it is not required for the UAE entity to do the Economic Substance Report of their Foreign Branch.
ESR Report 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 Report
The deadline to submit ESR Report is within 12 months of your financial year end. For Example, If your Financial year ended on 31 December 2020, you need to file your ESR report by no later than 31 Dec 2021.
Penalties for Failure to submit an Economic Substance Report and Failure to meet the Economic Substance Test
If the Licensee failed to submit the Economic Substance Report and any relevant information or documentation required to be submitted or failed to meet the Economic Substance Test for each Financial Year, means the Licensee is subjected to a penalty of dirhams fifty thousand (AED 50,000).
If the Licensee provides inaccurate information in the Economic Substance Report means the Licensee is subjected to a penalty of dirhams fifty thousand (AED 50,000).
An entity which will incorrectly claim exemption from the Economic Substance Regulations, and knowingly providing incorrect or false information, may result for the Licensee to be considered to have failed the Economic Substance Test for the Relevant Reportable Period.
Get in touch with us and let AMCA do it for you!
In relation with the Economic Substance Report, AMCA is here to help you and your business to comply with the proper procedures of filing and submitting your ESR Report. We will do all the preparations for your ESR Report and will ensure you to submit your Economic Substance Report on time.