EVERYTHING YOU NEED TO KNOW – ECONOMIC SUBSTANCE NOTIFICATION & REPORTING

NEW PROCEDURES AND DEADLINES – (No Longer in Effect)

The Economic Substance regulations have been entrusted to the Federal Tax Authority (FTA) in coordination with the Ministry of Finance (MoF), and as a result several key updates have been introduced:

NEW PORTAL LAUNCH

The MoF has introduced a new electronic portal for the submission of Economic Substance Notifications and Reports. The portal launch date set as December 2020.

EXTENDED SUBMISSION DEADLINES

Accordingly, the submission of ESR notifications due before the launch of the MoF portal had an extended deadline until 31 December 2020.

Similarly, the submission deadline of the Economic Substance Report for entities with financial year ending before 31 December 2019 have been extended to 31 December 2020.

UPDATED TEMPLATES

There has been also changes introduced to the documentations required from UAE businesses at time of submission.  

For instance, The Economic Substance Notification template requests detailed information related to:

• Registering Ultimate Beneficial Owner (UBO) details.
• Disclosing branch office information (if any).
• Self-certification of exempt status for exempted licensees.

The Economic Substance Report template further entails the following information from licensees required to complete ESR reporting: 

•  Provision of financial details.
•  Evidence of Core Income Generating Activity (CIGA).
•  UBO information.
•  Proof of local presence in terms of employees and assets.

EXEMPTIONS AND ASSESSMENTS

The ESR guideline published by MoF assists entities in UAE to determine their status regarding relevant activities and exemptions.

Entities falling under the category of exempted licensees are still required to file their ESR notification but are exempt from filing an ESR report.

It is strongly recommended that UAE businesses undertake the economic substance test to assess their eligibility for ESR Reporting.

IMPORTANT DEADLINES

The filing deadline for ESR notifications and reporting for licensees with financial years ended 31 December 2022 has been set at 30 June 2023 and 31 December 2023, respectively. Failure to meet deadlines impose penalties by the FTA.

ACTION REQUIRED – (No Longer in Effect)

• UAE businesses are advised to conduct an economic substance impact test promptly.
• Submit the Economic Substance Notification on the set due date stating if the business conducts a Relevant Activity.
• Ensure the Economic Substance Report is submitted by the deadline.

For further details and guidelines, visit the MoF’s economic substance regulations page. This consolidated guide aims to assist businesses in navigating the updated Economic Substance Notification and Reporting requirements effectively.

ECONOMIC SUBSTANCE – ESSENTIAL STEPS FOR UAE BUSINESS OWNERS – (No Longer in Effect)

Business owners need to get their UAE company in order, complete the requirements, identify any gaps, review compliance processes, and correct any errors. Below we share the next steps to ensure your business meets the requirements and standards on time:

• Arrange your ESR consultation with a registered corporate service provider.
• Start working/seeking the help of experts to work on your Economic Substance Report.
• If you have already completed your Economic Substance Report, have an expert review, and ensure all is in order and to meet standards.
• UAE entities (licensees) carrying out a relevant activity are required to submit their Economic Substance Notification and Report via the MoF portal on time.

Should you require assistance to complete your Economic Substance Return, reserve your free consultation with our tax & compliance experts via email at [email protected] or call +971 4 878 6240.