ECONOMIC SUBSTANCE REGULATIONS

Feb 1, 2024 active No Comments 982 Views

INTRODUCTION

Pursuant to the issue of Cabinet Decision No. 57 of 2020 concerning Economic Substance Requirements and Ministerial Decision No. 100 of 2020, the Ministry of Finance (MoF) has released the ESR Notification and Report Filing requirements & deadlines to be followed by all Licensees and exempted Licensees who are covered by the Economic Substance Regulations.

Who is subject to the Regulations?

The Regulations apply to Licensees that carry out any of the following Relevant Activities-

  • Banking Businesses
  • Investment Fund Management Businesses
  • Headquarter Businesses
  • Holding Company Businesses
  • Distribution and Service center Businesses
  • Insurance Businesses
  • Lease-Finance Businesses
  • Shipping Businesses
  • Intellectual Property Businesses

WHO NEEDS TO SUBMIT A NOTIFICATION?

Only Licensees and Exempt Licensees that undertake a Relevant Activity (irrespective of whether the Licensee or exempt Licensee has earned income from the Relevant Activity during the financial period) with a financial year commencing on or after 1 January 2019 are required to submit a Notification within 6 months from the end of relevant financial period.

WHO NEEDS TO FILE AN ECONOMIC SUBSTANCE REPORT?

Only Licensees that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an Economic Substance Report.

WITH WHOM THE ESR NOTIFICATION/ REPORT HAS TO BE FILED?

All Notifications and Economic Substance Reports must moving forward only be submitted electronically on the Ministry of Finance Portal. Licensees and/or Exempted Licensees can commence filing on the Ministry of Finance portal once.

DEADLINE

ESR NOTIFICATION

  • Licensees that undertake a Relevant Activity are required to file an annual Notification within six months from the end of the relevant financial period.

ESR REPORT

Licensees that earn income from their Relevant Activity(ies) are also required to file an Economic Substance Report within 12 months from the end of the relevant financial period.

PENALTIES

Failure to comply with the above could attract the following penalties:

  • Failure to submit ESR Notifications – AED 20,000
  • Failure to submit ESR Reports – AED 50,000

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