Are you ready? UAE Economic Substance Regulations Update (March 2020)

UAE introduced Economic substance regulations (ESR) in 2019 and since then Ministry of Finance has published various guidance notes and FAQs. Please refer to our previous articles on ESR (ESR update 2 , ESR update 1) in UAE.

Cabinet Resolution No. 58 of 2019 was issued by the Ministry of Finance to determine Regulatory Authorities for each of the “Relevant activities”, and included the free zones and financial free zones (that have issued licenses for the relevant activities) in the list (Cabinet resolution 58 of 2019).

Accordingly, some of the free zones regulatory authorities (such as Abu dhabi Global Market (ADGM), Dubai International Financial Centre (DIFC)) have issued updates and guidance on the implementation of ESR in their free zones.

As per ESR, Licensees must submit an annual notification to the designated regulatory authority stating whether the licensee is carrying on a relevant activity and, if so, whether any of the licensee’s gross income from a relevant activity is subject to tax outside the UAE. The licensee also must report the date of its financial year-end.

In addition to the annual notification, ESR require licensees that carry on a relevant activity from which they derive income (and if they are not exempt) to submit an annual return (in addition to the notification) within 12 months after their financial year-end (i.e. deadline of 31st Dec 2020 for financial year ended on 31st Dec 2019).

For ADGM and DIFC licensees, they are required to submit notification by 31st March 2020.

Other regulatory authorities will also announce their notification timelines and could be expected to follow similar timeline of 31st March 2020 for the notification requirement. Penalty for failure to notify: AED 10K – 50k

How can Premier Brains assist?

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• Initial impact assessment to assess whether the entity and its which activity is within the scope of ESR. This is very important step for the notification requirement.

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• Assist the entity in determining the economic substance test requirements, which need to be met.

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• Perform an assessment of the shortcomings in the current level of compliance with the Economic substance test requirements and advise on the changes to be done to ensure compliance.

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• Assist in preparation and submission of annual notifications and returns to the regulatory authorities

Article compiled by: BHAWNA CHOPRA

This document is only for information purposes and should not be construed as advice. It does not necessarily cover each aspect of the topic with which it deals. You should not act upon the contents of this document without receiving formal advice on your particular circumstances.

If you would like to discuss any tax-related matters, please drop us an email at info@premier-brains.com or call us at +971 4 3542959.

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