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FTA Approved Tax Agent

Economic Substance Regulation

As part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation, the UAE issued Economic Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019), (the “Regulations”) on 30 April 2019.

The ESR Regulations apply to companies, partnerships, and other business forms (Licensee) registered in the UAE, including a Free Zone and Financial Free Zone, which carry out any Relevant Activity.

The Regulations apply to all UAE onshore and free zone companies including Offshore companies also that carry a “Relevant Activity”.

The following are considered as “Relevant Activities” under the Regulations:

  • Banking Business
  • Insurance Business
  • Investment Fund
  • Lease-finance Business
  • Headquarters Business
  • Shipping Business
  • Holding company Business
  • Intellectual property(IP) Business
  • Distribution and Service Centre Business.

Timeline Of Submission

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

Penalty For Non-compliance

Failure to file ESR notification: AED 20,000
Failure to file ESR report: AED 50,000

How Mac & Ross Can Help You

  • To analyse the company structure & identify the entities that qualify for ESR as per the business activities.
  • To perform an assessment on the current compliance level of the company as per the ESR.
  • To conduct ESR test on the company & prepare the information for ESR reporting.
  • To share the knowledge on ESR requirement with the concerned person in the organization & prepare compliance checklist.
  • Assistance in submission of the notification information & ESR report with the Regulatory Authority.