BETA
ESR
In 2019, The Economic Substance Regulations were introduced in the UAE following which, guidance on the application of these regulations was also introduced.
In accordance with the guidelines, UAE businesses engaged in the Relevant activities* outlined in the guidance must establish a sufficient economic presence by satisfying the UAE economic substance assessment Test and Procedures. Therefore, such companies are Obligated to notify and submit an annual UAE economic substance report to the regulatory authorities.
ESR
TAXATION & COMPLIANCES
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Aspects of Reporting and Notification
An Annual Report to the regulatory authority by the companies in the UAE should include the following:
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The date of the Financial Year
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If they carry out a relevant activity in the UAE
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If any income is subject to tax outside the UAE
Furnishing information regarding the activity, income, expenditures, and assets is obligatory to ascertain compliance with the UAE economic substance assessment. The companies are required to deliver this report to the Authority within a period of 12 months following the conclusion of each fiscal year.
What are the major actions that companies need to take before the end of a fiscal period?
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Evaluation of the Relevant Activities conducted during the financial period employing a substance-over-form approach.
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Examination of the quantity and nature of income derived from the Relevant Activity throughout the financial period.
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Conduct meetings of the board involving physically present directors in the UAE.
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Execute and uphold the minutes of board meetings within the borders of the UAE.
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Ascertain the volume and nature of expenses, along with UAE-based assets associated with the Relevant Activity.
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Companies must ensure that access to assets can be substantiated through agreements and financial records.
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Determination of the count of full-time employees (based in the UAE) responsible for overseeing the Relevant Activities.
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Evidencing control and supervision over any outsourcing agreements.
Relevant Activities are :
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Banking Business
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Insurance Business
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Investment Fund Management Business
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Lease – Finance Business
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Headquarters Business
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Shipping Business
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Holding Company Business
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Intellectual property Business (“IP”)
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Distribution and Service Centre Business
Failing to comply with the UAE Economic Substance Reporting may attract different actions and penalties and can result in a fine of AED 10,000 to AED 50,000 for any of the failure to notify, failure to provide accurate or complete information, failure to demonstrate sufficient economic substance in the UAE.
