ECONOMIC SUBSTANCE REGULATIONS – UAE – 2019
ECONOMIC SUBSTANCE REGULATIONS 2019
On 11 September 2019, the United Arab Emirates (UAE) issued Ministerial Decision No. 215 of 2019 containing guidance for businesses on compliance with the Economic Substance Regulations (ESR), enacted in April. Businesses in the UAE should review the ESR and associated guidance to determine whether they are subject to the ESR requirements and the related notification and reporting requirements.
Applicability: All Entities having a License in UAE which carry on Relevant Activities (with a Few Exceptions)
Relevant Activities: Banking, Insurance, Investment fund management, Shipping, Lease-finance, Distribution and service centers, Headquarters and Intellectual property (IP) activities.
Reason/ Purpose : To determine whether the UAE entity meets the ESR conditions and reporting of the same to the competent authority
Penalty: Non-compliance may result in administrative penalties for failure to meet the economic substance test (up to AED 50,000 in the first financial period, and up to AED 300,000 in subsequent financial periods), administrative penalties for failure to provide information (up to AED 50,000), spontaneous exchange of information, and potentially de-registration.
Compliance: Within 12 months from the end of Financial Year.
- Notify the Regulatory Authority on whether the entity is carrying on any Activites as mentioned above.
- If Yes, then licensees carrying out a relevant activity are required to submit a report to the Regulatory Authority including the type of relevant activity conducted, amount and type of income, operating expenses, assets, and employee information.
How can MITRAA assist you and your organization?
- Understanding the operations of the Business, the Activities performed and the nature of income(s) earned
- Determining the Applicability of ESR Notification/ Regulations
- Identifying and documenting the core income generating activities performed by the entity and whether they are adequate having regard to the nature of business & size of the entity/ operations
- Undertaking benchmarking study (based on comparable companies) to determine what would be considered as “adequate” to the business and preparing a report thereon
- Highlighting any risk areas and recommend suitable suggestions (if any) that could be considered by the Management of the Company to strengthen the economic substance in UAE in accordance with the ESR Regulations.
- Assistance in Compliance with the ESR Notification.
- Assistance in Preparation/ review of ESR form/ report/ return (as and when notified).
Our Team of professionals have worked in the field of International Taxation across various jurisdictions for over 15 years. At MITRAA we are confident we would be able to provide a comprehensive and holistic view on the said subject.
Contact: email@example.com or firstname.lastname@example.org