Economic Substance Regulations Reporting in UAE

Economic substance regulations is not a novel thing anymore. Entities in UAE are aware of the regulations and most of them have already filed the notification. Some of them are still in the process of filing notification, by paying penalty since the deadline is already over.

But ESR notification filing is not the end to the process; it is just the beginning. Companies carrying out the Relevant Activity must submit an annual report within a year of the end of the fiscal year of the business. The report should include detailed information about the relevant activity. ESR reporting must be done within the time prescribed by the Regulatory Authority and should follow the form and manner as specified by the Authority.

The UAE economic substance regulations apply to all UAE onshore and free zone companies, branches, representative offices, and other business forms established or licensed in the UAE that engages in one or more of the ‘Relevant Activities’ and generate revenue from these activities.

Relevant Activities under ESR in UAE

• Banking Business
• Insurance Business
• Investment Fund management Business
• Lease – Finance Business
• Headquarters Business
• Shipping Business
• Holding Company Business
• Intellectual property Business (“IP”)
• Distribution and Service Centre Business

The economic substance regulations reporting should contain information related to the tax residence, status of the entity, the turnover, number of employees, amount of expenditure, address, etc. The information should be supported with documentary evidence.

Requirements to meet Economic Substance Test in UAE

A Licensee meets the Economic Substance Test in relation to a Relevant Activity in the following cases:

1. If the Licensee conducts State Core Income-Generating Activity in the State.
2. If the Licensee is directed and managed in the State in relation to that activity, provided the Licensee’s board of directors meets in the State at an adequate frequency having regard to the amount of decision-making required at that level.
3. Having regard to the level of Relevant Activity, if there is an adequate number of qualified full-time employees in relation to that activity who are physically present in the State (whether or not employed by the Licensee or by another entity and whether on temporary or long-term contracts), or adequate level of expenditure on outsourcing to third-party service providers, whose activities, employees, expenditure, and premises are in the State; and these activities, employees, expenditures, and premises are adequate for carrying out the Relevant Activity being outsourced.
4. If there is adequate operating expenditure incurred by it in the State, or adequate level of expenditure on outsourcing to third-party service providers whose activities, employees, expenditure and premises are in the State; and these activities, employees, expenditures, and premises are adequate for carrying out the Relevant Activity being outsourced.
5. If there are adequate physical assets in the State or adequate level of expenditure on outsourcing to third-party service providers in the State, for the activities of the Licensee;
6. In the case of State Core, Income-Generating Activity carried out for the relevant Licensee by another entity, if it is able to monitor and control the carrying out of that activity by the other entity.

What are the consequences of ESR non-compliance?

Late or non-reporting, as well as failure to comply with economic substance requirements, could result in penalties, spontaneous exchange of information with foreign authorities, and potential suspension, revocation, or non-renewal of its registration.

What HLB HAMT offers?

• Consulting on Economic Substance Regulation (ESR)
• Identify the qualifying entities for Economic Substance Regulation compliance
• Identify the qualifying business segments for Economic Substance Regulation compliance
• Report and advise on overall Economic Substance Regulation readiness by the Entity
• Ongoing Economic Substance Regulation compliance
• Secretarial services in connection with Economic Substance Regulation record maintenance
• Economic Substance Regulation filing with the authorities in the proper /prescribed format

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Varun R Chandra

07:38 25 Apr 21

HLB Hamt is highly recommended! They have the quality of services that would satisfy your needs. I'm glad I found them.

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06:20 31 Jan 21

I HAD A GOOD EXPERIENCE WITH HLB HAMT DUBAI. THEY HAVE A VERY PROFESSIONAL TEAM, GOOD QUALITY OF SERVICES, GOOD VALUE... FOR PRICE.I RECOMMEND THIS COMPANY.read more

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Professionally managed firm with commitment to the engagements taken. My company and its group are assigning our... requirements for last 12 years to HLB and we don’t have any negative remarks on any assignments.read more

PMI

07:14 23 Jun 20

In my opinion, HLB Hamt is one of the best professional firms in UAE after big4. Excellent client service, professional... and competent staff and timely delivery are their strength. Over the years they have developed the infrastructure and skill set to handle multiple verticals ie, audit, tax services, consulting, IT support etc.Wishing HLB Hamt team all the very best.read more

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18:17 06 Jun 20

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06:32 04 Jun 20

Very professional team. Vimal has always given us good solution advice for various Software and IT Infra projects. We... are very Extremely satisfied working with him and his team. Wishing them success.read more

Basil Daniells

05:55 03 Jun 20

I have worked with HLB as a partner of Sage for about 2 years, they were dedicated to the success of the partnership... and kept aligned with the business plan that was agreed between our two companies. They are always ready to go the extra mile for a customer and don’t shy away from challenging circumstances. Keep up the good work and wish you all the success in the future.read more

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19:28 02 Jun 20

Team of well qualified and organised professionals. Their reports are not based on numbers first they will understand... their client and their business. They are highly recommended and trust worthy.read more

Radz de Jesus

16:03 02 Jun 20

We're glad to have found HLB Hamt to conduct the IT audit and risk assessment for our organization. We have learned a... lot from their team during that first project. And since then, we've continued to be in touch with them. Mr. Vimal especially is very good at presenting technical concepts in simple yet interesting ways that non-IT and business people alike would easily catch. We are very happy with the professionalism and quality of service they provide. They leave their clients nothing short of satisfied. Highly recommended.read more

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