ECONOMIC SUBSTANCE REGULATION
SERVICES IN UNITED ARAB EMIRATES
In April 2019, the UAE issued Cabinet of Ministers Resolution No. 31 of 2019 concerning Economic Substance (“Resolution 31") as part of its commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE's tax framework by the European Union Code of Conduct Group on Business Taxation.
In UAE, all free zone and onshore companies and certain other business forms that carry out certain defined activities are required to maintain an adequate “economic presence" in the UAE.
Purpose of Economic Substance Regulation
The primary purpose of the Regulations is to ensure that actual profits are reported by entities in UAE, especially profits that are associated with the economic activity undertaken within the UAE.
Relevant Activities under ESR regulations in UAE
Following are the business forms and entities that have to follow Economic Substance Regulation In UAE:
• Lease-Finance Businesses
• Banking Businesses
• Insurance Businesses
• Investment Fund Management Businesses
• Shipping Businesses
• Holding Company Businesses
• Intellectual Property Businesses
• Distribution and Service centre Businesses
Schedule to Follow for ESR
Entities that are within the scope of the Regulations are required to submit an annual Notification form to their Regulatory Authority.
Consequences of Non-Accurate ESR Submission
Penalty levied in the case of defaulting to submit the ESR notification, or failure to submit any information or documents requested by the authorities is AED 20,000.
How can Fundforth Help?
We at FundForth can assist you with the following:
Performing the Economic Substance Test
Assuring timely filing and catering to any queries related to filing and notification of ESR.