How Does Your Business Comply With The UAE Economic Substance Regulations?

 

What is Economic Substance Regulation? Well, for starters, the UAE introduced Economic Substance Regulations on 30th April 2019, and these regulations require UAE mainland and free zone companies and other UAE business forms that carry out relevant activities to ensure standards related to Base Erosion and Profit Shifting (“BEPS”) are implemented. The UAE has complied to implement: Countering harmful tax practices, country-by-country reporting, prevention of granting tax treaty benefits in inappropriate circumstances and mutual agreement procedure.

Entities that are directly or indirectly owned by the UAE government (both federal and local) are specifically excluded from the Regulations. On this basis, UAE sovereign investment funds and other UAE government related entities would not need to meet the UAE economic substance requirements.

ESR in UAE applies to companies in banking, insurance, lease-finance, investment fund management, shipping, holding companies, headquarters, intellectual property and distribution & service centers. 

What should be included in the ESR report?

• The value/type of income earned from activities

• The location of the activities and the property used to conduct those activities

• The number of team members responsible for conducting the activity

• A disclosure by the company stating they have met Economic Substance Requirements

Have you defaulted on the esr fillings?

• A penalty of AED 10,000 – AED 50,000 will be levied if you fail to notify or provide accurate information or don’t demonstrate sufficient economic substance in the UAE.

• A penalty of AED 10,000 – AED 50,000 will be levied if you fail to provide information exchange with the foreign competent authority in relation to company or owner.

• A penalty of AED 100,000 - AED 300,000 will be levied and your license can be suspended if you fail to provide any of the above for the second financial year.

Are you unsure if your company is complying with Economic Substance Regulations? Get in touch with TRC Pamco, the best ESR filing company in Dubai. They can help you with your requirement, and stay ESR compliant.