It Known also as the “ESR,” the Economic Substance Regulations were formally introduced to the United Arab Emirates on April 30th, 2019, by Cabinet of Minister Resolution No. (31) of 2019.
According to Cabinet Decision No. 57 of 2020 concerning Economic Substance Requirements (“Decision 57”) and Ministerial Decision No. 100 of 2020 (“Ministerial Decision 100”), organisations performing one or more Relevant Activities must file a notification (and/or Economic Substance Report).
All notifications and economic substance reports must move forward only and be submitted electronically on the Ministry of Finance Portal, in accordance with Article 6.7 of Ministerial Decision 100.
Notification of ESR
- Once the Ministry of Finance portal is operational, which is expected to happen in the first week of December 2020, Licensees and/or Exempted Licensees may begin filing.
- Prior to the launch of the Ministry of Finance Portal, the filing period for notifications will be extended until December 31, 2020.
- Licensees and/or Exempted Licensees must resubmit their Notification by no later than 31 December 2020 if they have already done so to a Regulatory Authority before the Ministry of Finance Portal is live (for instance, by the 30 June 2020 deadline).
- A penalty of AED 20,000 will be assessed to Licensees and/or Exempted Licensees who fail to submit their Notification along with the necessary supplemental papers before December 31, 2020.
Reporting of ESR in UAE
- Decision 57’s Article 8.4 states that all Economic Substance Reports must be provided within a year of the Financial Year’s end.
- Economic Substance Reports must be filed by December 31, 2020, for Financial Years beginning on or after January 1, 2019, and ending on or before December 31, 2019, respectively.
- The short financial years of licensees and exempted licensees (where applicable) that finish on or before December 31, 2019, are likewise subject to this deadline.
- A penalty of AED 50,000 will be assessed to Licensees and/or Exempted Licensees (where applicable) who fail to submit their Economic Substance Report within the aforementioned time frame.
ESR in UAE inadvertently imposes the requirement that all UAE organisations (including offshore businesses and branches of domestic and foreign corporations) who engage in and generate money from any Relevant Activities maintain the economic substance in the UAE that is unique to each Relevant Activity. Organizations must comply with annual filing obligations to avoid penalties for non-compliance.
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