The Economic substance Regulations is a directive in the UAE’s tax framework that came into effect from January 1st, 2019. The  ESR applies to all businesses and organizations in the UAE, including onshore companies, free zone companies, non-partnership companies, and partnership firms. The main motive behind the introduction of the ESR notification form in UAE is to provide the Financial authorities with all the information regarding the profits culminated by businesses and organizations. It will further help the FTA authorities in analyzing the entire business scene and the economic development in the UAE. 

Economic Substance Notification Form:

The Economic Substance Notification form contains the primary information regarding your business activity and is a prerequisite for all other obligations of the Economic Substance Regulations in UAE.

You can file your organization’s Economic Substance Regulations UAE Form through the official portal of UAE’s Ministry of Finance. Your notification form must have the following details before submission:

  • Details of the licensee
  • Registered office address
  • Branch details
  • Details on your reportable period
  • Type of relevant activity your business carries out
  • Details on your profits
  • Details on your eligibility for exemption  
  • The details of the parent company
  • Details of the ultimate beneficial owner
  • Details of the designated contact person
  • Final declaration

The penalty for failure to file the ESR notification form in the UAE is AED 20,000.

Economic Substance Test:

Requirements to meet Economic Substance Test in UAE

The economic substance test in Dubai requires a license holder to demonstrate or elaborate on the following areas:

  • The way of direction and management of the organization and its relevant activities in the UAE
  • The total income the relevant core income-generating activities culminate
  • The number of employees employed in the licensee’s organization or branch in the UAE
  • Details on the physical assets and expenditure of the organization in the UAE

The penalty for failure to take an ESR test within a financial year is AED 50,000.

Economic Substance Report:

The licensees under the Economic substance regulations form must file their ESR report within 12 months from the end of their financial year.

Here are the key contents your ESR report must consist of:

  • Location and type of your business
  • Income details
  • Details on the physical assets 
  • Details on ownership
  • The details on employees
  • Details on intellectual property, if applicable
  • Final declaration

The penalty for failure to submit the ESR UAE report is AED 50,000. 

Economic substance regulations Dubai

UAE Economic Substance Regulations:

The following are a few key points that you will have to know regarding the Economic Substance Regulations in the UAE:

  • The licensees under the Economic substance Dubai must have a high degree of control over their company’s IP assets.
  • The organization must have adequate full-time employees in each branch with the required qualifications.
  • Also, note that the employees must permanently reside and perform their activities in the UAE. 
  • You will have to provide the necessary employee information like experience, contact details, and qualifications to the FTA.
  • The licensee must have a business plan showcasing the reasons for holding the license for ESR in the UAE.
  • The relevant decision making of the organization or company must continue to take place in the UAE.
  • The company must have adequate expenditure accumulated in the  UAE or adequate expenditure on outsourcing within the financial year.
  • The company or organization must have adequate physical assets in the UAE.
  • The failure to fulfill the economic substance submission and ESR obligations can attract penalties.
  • The penalty for providing inaccurate information is AED 50,000.

Why KGRN?

KGRN is one of the renowned legal service providers in the UAE. We have a team of knowledgeable and well-experienced professionals to help you with your legal queries and issues. We also help businesses and organizations meet the Economic Substance Dubai obligations in the UAE. 

For more Detailed information about ESR, Visit: Economic Substance Regulations(ESR) Guidelines

Contact our professionals for more information regarding our services and areas of expertise in the UAE.

Related Information

ESR UAE

For enquiries, call +971 45 570 204 / E-mail: support@kgrnaudit.com

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