Economic Substance Regulations
Introduction to ESR in UAE
The UAE introduced a Regulation on the Economic Substance (ESR) in April 2019 and replaced it in August 2020 because of its commitment to becoming a member of the OECD Inclusive Framework and in response to an evaluation of the UAE’s tax framework by the European Union (“EU”) Code of Conduct Group on Business Taxation.
What are the Relevant Activities?
2). In the UAE, it engages in Core Income-Generating Activities (CIGA).
3). It satisfies the necessary requirements in terms of the level of relevant activity carried out in the UAE.
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What is expected if ESR is applicable to your business?
If you are performing relevant activities and earning money from them, you must;
- Submit ESR notification
- Send in your ESR report
- Ensure the business is managed in accordance with the law and that adequate documentation is maintained
Due Dates for ESR
What are the due dates for submission of the ESR notification and ESR Report?
ESR Notification must be submitted to the Ministry of Economy within 6 months of the end of the fiscal year, and ESR Report must be submitted within 12 months of the end of the fiscal year.
The table below shows the applicable dates based on the fiscal year-end date:
Financial Year-End Date
ESR Notification submission last date
ESR Report submission last date
AML/CFT Policy, Controls, and Procedures Documentation
We create for you the right policies, rules, and procedures concerning AML/CFT frameworks. Our process of creating appropriate AML/CFT frameworks that are right for your business is as follows:
What are the penalties for not complying with ESR?
- Failure to submit ESR Notification in time: AED 20,000
- Failure to submit ESR Report in time: AED 50,000
- Failure to meet the Economic Substantive Test: AED 50,000
- Failure to provide accurate or complete information: Penalty of AED10,000 to AED 50,000;
How can Spectrum Auditing facilitate you in complying with ESR?
- Spectrum can assist you in assessing whether ESR is applicable to your business or not
- We can assist you in submitting the ESR notification
- We can assist you in bringing the necessary changes in organising your business to be able to comply with the requirements of ESR
- We can assist you in submitting the ESR return
- We can assist you in submitting an appeal against the penalties that are already levied in relation to ESR compliance