Navigating Economic Substance Regulations in the UAE Simplified
Overview of Economic Substance Regulations in the UAE
The Economic Substance Regulations (ESR) were initially introduced in the UAE in April 2019 under Cabinet Resolution No. 31. Subsequent amendments were made through Cabinet Decision No. 57 and updated guidance (Ministerial Decision No. 100 of 2020) in September 2020. These regulations require UAE companies engaged in ‘Relevant Activities’ to establish substantial economic presence within the UAE, as determined by the ES Test.
For companies involved in ‘relevant activities’ and earning income from them, compliance includes submitting an annual ES Notification within six months from the end of the relevant financial period. Additionally, these companies must submit a comprehensive ES Report within 12 months from the end of their fiscal year.
Penalties for Non-Submission of ES Notification
Not submitting an ES Notification incurs a fine of AED 20,000. Failure to comply with ESR requirements, which includes not filing an ES Report, demonstrating insufficient economic substance, or providing inaccurate or incomplete information, results in a fine of AED 50,000 per fiscal year. These fines can accumulate to as much as AED 400,000. Additionally, non-compliance may lead to spontaneous exchange of information with the Foreign Competent Authority and other administrative actions such as suspension, revocation, or non-renewal of the entity’s trade license or permit in the UAE.
How We Can Help You?
- ES Impact Assessment
- ES Notification Preparation
- ES Report Preparation
- ESR Appeal Assistance
In conclusion, our extensive services are tailored to simplify your adherence to the Economic Substance Regulations in the UAE. Get in touch with us today to effectively navigate the new regulations for UAE companies.
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