On January 1st, 2019, the Economic Substance Regulation in Dubai (ESR) went into effect. On April 30, 2019, the UAE introduced a resolution on the economy (Cabinet of Ministers Resolution No.31 of 2019, or the “Regulations”). Companies must comply with the ESR standards by taking the necessary actions.
• Adherence to notification requirements • Submitting a yearly drug report
Because ESR is regulated by the appropriate Regulatory Authorities, there are a few minor variations in how ESR returns must be filed. This covers various due dates, documentation needs, and associated fines for non-compliance. The Regulations mandate that UAE onshore and Free Zone Companies, as well as other UAE company forms, preserve a sufficient “economic presence” in the UAE regarding the “Related Activities” they engage in. Therefore, a Notification of Economic Substance must be submitted.
The UAE enforces the Economic Substance Regulations (ESR) on domestic enterprises operating there, including those operating in free zones and those involved in any of the listed “related activities.” These businesses are required to submit notices of economic substance, together with an initial description of the activities, to the regulatory authorities. Before the company can submit an economic substance report, this notification must be made.
FQA Filling ESR Notification:
1. How to file an Economic ESR?
Before ESR was implemented in the UAE, several businesses profited from the tax-free status. To prevent paying excessive taxes to the government of the original country, they relocated their profit centers to the UAE. This was a tactic some businesses employed to evade taxes while disregarding the economic advantages the UAE offers. ESR in the UAE prevents such conduct by enabling businesses to alert them through their pertinent activity. When businesses carry out the tasks listed in their trade license and have a typical UAE business arrangement, that activity is relevant.
2.What is the purpose of the Notification?
This Notification’s objective is to give the DWTCA some preliminary information regarding the Licensee and its operations in the UAE, and it serves as a requirement for submitting an Economic Substance return for the Notifiable Period (where required).
3.Who needs to submit a Notification?
If your UAE business engages in any of the following Related Activities within the pertinent accounting period, you shall file an Economic Substance Notification.
Relevant Activities
• Banking Industry
• Insurance Industry
• Business of Investment Fund Management
• Lease – Business Finance
• Corporate Business
• Shipping Industry
• Holding Company Business
• Intellectual Property Business (“IP”)
• Business Distribution and Service Centers
The table below lists the due dates for submitting the ES Report and Notifications.
| Financial Year End | Notification filing deadline |
| 30 Jun 2021 | 31 Dec 2021 |
| 31 Jul 2021 | 28 Feb 2022 |
| 31 Aug 2021 | 31 Mar 2022 |
| 30 Sep 2021 | 30 Apr 2022 |
| 31 Oct 2021 | 31 May 2022 |
| 31 Jan 2022 | 30 Jun 2022 |
| 28 Feb 2022 | 31 Jul 2022 |
| 31 Mar 2022 | 31 Aug 2022 |
| 30 Apr 2022 | 30 Sep 2022 |
| 31 May 2022 | 31 Oct 2022 |
| 30 Jun 2022 | 31 Dec 2022 |
4.What happens if the information provided in the Notification is incorrect?
Penalties for giving false or inaccurate information in the Economic Substance (ESR) Notification range from AED 10,000 to AED 50,000. For the related accounting period, the Licensee may be regarded to have failed the Economic Substance (ESR) Test if they knowingly provided inaccurate or fraudulent information or claimed an exemption from the Economic Substance Regulations (ESR).
5.What happens if a Licensee does not submit a Notification, although it is required to do so?
Penalties of between AED 10,000 and AED 50,000 are assessed for failure to comply with the requirement to submit an Economic Substance Notification (ESR) by the deadline.
6.Can a single Notification be filed for multiple Licensees?
No, regardless of whether the Licensee is included in a consolidated group for accounting objectives, each Licensee should submit a stand-alone Economic Substance Notification (ESN).
7.How should the Notification or Report be filed?
Once the Ministry of Finance portal is operational in the first week of December 2020, both the Economic Substance Notification (ESR) and the Economic Substance Report (ESR) must always be submitted there.
Organizations whose fiscal year ends on June 30, 2021, must submit their Economic Substance Reports (ESR) via the MoF Portal by June 30, 2022.
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