Economic Substance Regulations in UAE

What exactly are the UAE's Economic Substance Regulations?

UAE introduced a Resolution on the Economic Substance on April 30, 2019, and all private sector enterprises must abide by its rules. The primary financial requirements and tax structure that licenced firms operating in the UAE must adhere to are laid out in this legislation. This resolution was put forth as part of the OECD’s membership requirements and the accompanying Taxation and Auditing Framework.

UAE Business & Economic Substance Regulations

This legislation applies to all private sector businesses in the UAE, including those located onshore and in free zones. Companies that have contracted out activities must also abide by the ESR if the contracted activities are carried out in the UAE.

CIGAs are essential

The following list of Core Income Generating Activities (CIGAs) should be included in the declaration:

Banking Business
Insurance Business

Investment Fund Management Business

Lease – Finance Business
Headquarters Business
Shipping Business
Holding Company Business
Intellectual property Business
Distribution and Service Centre Business

Submissions / Filing

All licenced entities subject to the regulations must submit a notification to their regulatory authority requesting the filing of their economic substance declaration. They must submit the declaration within 12 months after the end of their fiscal year.

Regulatory Authorities

Ministry of Economy (MOE), Abu Dhabi Global Market (ADGM), Abu Dhabi Media Zone Authority (ADMZA), Dubai Airport Free Zone (DAFZA), Dubai Development Authority (DDA), Dubai International Financial Centre (DIFC), Dubai Multi Commodities Center (DMCC), Dubai Aviation City Corporation (DCAA), Dubai Healthcare City (DHC), and Dubai World Trade Center (DWTC) are among the regulatory bodies listed in Cabinet Decision No. (58) of 2019, released on September 4, 2019.

Regulations for Economic Substances in the UAE Deadlines / Due Dates

Financial years beginning on or after January 1, 2019, and ending on December 31, 2019, as well as those beginning on April 1, 2019, and ending on March 31, 2020, must file the information f.

The reporting deadline must be announced on the Ministry of Finance website and is typically before the end of the first quarter of the following fiscal year.

Rules for Economic Substances UAE penalties

Penalties, potential suspension, cancellation, or non-renewal of its registration, as well as disclosure of pertinent information to foreign organisations, will occur from noncompliance with the Regulations or failure to submit the declaration.

Exemptions

A firm or other entity is exempt from the requirement to pass the economic substance test and submit an economic substance statement for a financial period if it did not generate any revenue during that financial period from any of the relevant activities mentioned above.

The ESR Regulations do not apply to any entities directly or indirectly licenced by the Federal, an Emirate, or a UAE Government entity or authority, with at least 51% ownership by these.

What's the role of Finsouls Accounting Services in Dubai, UAE?

FINSOULS Accounting and Bookkeeping Services is a well-known firm that offers tax and VAT consulting services in Dubai, United Arab Emirates. One of the top internal audit companies in Dubai, we can be very helpful in auditing and filing the statements necessary to comply with the ESR laws. Finsouls can help you complete all necessary submissions and qualify for the process by providing an accurate assessment and advice on your company’s compliance with ESR criteria and regulations.

One of Dubai, United Arab Emirates top accounting firms is Finsouls. Our unique selling point is that we employ two licenced, registered, and certified tax consultants in Dubai. We are the leading authority for all forms of tax agent services in the UAE among UAE VAT Consultancy.