Economic Substance Regulations in UAE

Economic Substance Regulations in UAE
On 30 April 2019 UAE introduced a Resolution on the Economic Substance and these regulations are applicable for all private sector companies. This regulation lists out the minimum financial criteria’s and tax framework that the licensed entities operating in UAE shall follow. This resolution was introduced as part of the membership requirements of OECD and its related taxation and auditing Framework.
All private sector companies in UAE including onshore and free zone companies comes under this regulation. The companies that have outsourced activities and if the activities are carried out in UAE, then these companies also are require to comply with the ESR.

CIGAs applicable

The Core Income Generating Activities (CIGAs) that should be filing the declaration are as given below :-

 Banking Business

 Insurance Business

 Investment Fund management Business

 Lease – Finance Business

 Headquarters Business

 Shipping Business

 Holding Company Business

 Intellectual property Business

 Distribution and Service Centre Business

Submissions / Filing

All licensed entities that are governed by the regulations will need to file a notification for submission of their economic substance declaration to their Regulatory Authority and file the economic substance declaration within 12 months from the end of their financial year.

Regulatory Authorities

The following are the regulatory authorities included under Cabinet Decision No (58) of 2019 issued on 4 September 2019 :-
Ministry of Economy (MOE), Abu Dhabi Global Market (ADGM), Abu Dhabi Media Zone Authority (ADMZA), Dubai Airport Free Zone (DAFZA), Dubai Development Authority (DDA), Dubai International Financial Centre (DIFC), Dubai Multi Commodities Centre (DMCC), Dubai Aviation City Corporation (DCAA), Dubai Healthcare City (DHC), Dubai World Trade Centre (DWTC), Fujairah Free Zone, KIZAD, Ajman Free Zone, Hamriyah Free Zone Authority, , RAK Economic Zone, RAK ICC, Sharjah Airport International Free zone (SAIF ZONE), Umm Al Quwain Free Trade Zone, International Free Zone Authorities.
Filing of the detail f shall apply to financial years commencing on or from 1 January 2019 that will be ending on 31st December 2019 or starting from 1st April 2019 and ending by 31st March 2020.
Due date on the filing are generally before the end of the first quarter of next financial year and shall be listed in the Ministry of Finance website.

Economic Substance Regulations Penalties in UAE

Noncompliance to the Regulations or failure to file the declaration shall result in penalties, potential suspension, revocation, or non-renewal of its registration and sharing of related information to foreign bodies.
Exemptions
If a company or an entity have not earned any income in its financial period from the above listed relevant activities, then they are exempted from the requirement to meet the economic substance test and file an economic substance declaration for that financial period.
All entities that are licensed directly or indirectly under a Federal or an Emirate Government, or a UAE Government body or authority with at least 51% ownership by these are exempt from the ESR Regulations.
KBA Accounting and Bookkeeping services in Dubai, being reputed professional Tax and VAT consultants in Dubai, UAE. We are one of the best internal audit firms in Dubai and can play pivotal role in auditing and filing the declarations as required by the ESR regulations. KBA can give proper assessment and recommendations on your company’s compliance to ESR requirements and regulation and can assist you to carry out all required submission and to qualify in the process.
KBA is one of the best accounting firms in Dubai, UAE. Our specialty is that we have two certified FTA approved and registered TAX Consultants in Dubai. We are the experts out of all VAT Consultancy in UAE for all types of Tax Agent Services in UAE.

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