ESR Filing Company Dubai, United Arab Emirates
ESR Compliance – Accruon consultant, UAE
The United Arab Emirates enacted the ESR in resolution No. 31 on 30th April 2019. Any natural or juridical person licensed by a competent licensing authority in the UAE that carries out any relevant activity is subject to the Economic Substance Regulations.
The United Arab Emirates issued Ministerial Decision No. 215 on 11th of September 2019 containing guidance for businesses on compliance with the Economic Substance Regulations enacted in April. Businesses in the UAE should review the ESR and associated guidance to determine whether they are subject to the ESR requirements and the related notification and reporting requirements.
In response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group as a member of the Organization for Economic Development and Cooperation (OECD), the UAE have committed to ensure standards related to Base Erosion and Profit Shifting (BEPS) are implemented.
Entities covered under the Economic Substance Regulation
ESR applies to all UAE onshore and free zone companies that carry out a relevant activity. However, it is not confirmed that the ESR applies to sole proprietorships and branches, but we expect entities incorporated under offshore company’s regulations that carry on a relevant activity to be within the scope of the ESR. Entities that are directly or indirectly owned by the UAE government (federal or local) are specifically excluded from the Regulations. On this basis, UAE sovereign investment funds and other UAE government-related entities would not need to meet the UAE economic substance requirements.
Some of the activities that are considered as relevant activities under the ESR are banking, fund management, lease-finance, holding company, insurance, headquarters, shipping, intellectual property, distribution and service center.
Activities that shall be conducted by an entity in the state in respect of Banking Business include raising funds, managing risk including credit, currency and interest risk.
Activities that shall be conducted by an entity in the state in respect of taking hedging positions include providing loans, credit or other financial services to customers.
Activities that shall be conducted by an entity in the state in respect of insurance business include predicting and calculating risk.
Activities that shall be conducted by an entity in the state in respect of insuring or re-insuring against risk and providing Insurance Business services to clients include underwriting insurance and reinsurance.
Activities that shall be conducted by an entity in the state in respect of investment fund management Business include taking decisions on the holding and selling of investments.
Activities that shall be conducted by an entity in the state in respect of calculating risk and reserves include taking decisions on currency or interest fluctuations and hedging positions.
Activities that shall be conducted by an entity in the state in respect of lease-finance business include agreeing funding terms, identifying and acquiring assets to be leased, setting the terms and duration of any financing or leasing, monitoring and revising any agreements and managing any risks
Activities that shall be conducted by an entity in the state in respect of headquarters business include taking relevant management decisions, ensuring operating expenditure on behalf of group entities and coordinating group activities
Activities that shall be conducted by an entity in the state in respect of shipping business include managing crew, overhauling and maintaining ships, overseeing and tracking shipping and determining what goods to order and when to deliver them, organizing and overseeing voyages.
Activities that shall be conducted by an entity in the state in respect of holding company business, all activities related to that business.
Activities that shall be conducted by an entity in the state in respect of holding company business that derives income from other sources other than dividends and capital gains from its equity interest, the state core income-generating activities shall be those activities associated with the income generated.
Activities that shall be conducted by an entity in the state in respect of intellectual property business:
1. When the intellectual property asset is a patent or an asset that is similar to a patent, research, and development includes non-trade intangible, branding, marketing, and distribution.
2. If the relevant activity is conducted by a Licensee that is regarded as a high-risk IP Licensee, the state core income-generating activity must include any of the following additional activities:
• Taking strategic decisions and managing (as well as bearing) the principal risks related to the development and subsequent exploitation of the intangible asset generating income.
• Taking the strategic decisions and managing (as well as bearing) the principal risks relating to the acquisition by third parties and subsequent exploitation and protection of the intangible asset. leading to the generation of income from third parties.
Activities that shall be conducted by an entity in the state in respect of distribution and service center business include providing consulting or other administrative services to foreign related parties and procuring goods (raw materials or finished products) from foreign-related parties.
Entities exempt from regulation are:
Any commercial company which is directly or indirectly owned 51% or more by the UAE government is exempt. In this respect, the UAE Government includes the UAE Federal Government, as well as any local government bodies.
What are the economic substance requirements (ESR)?
To satisfy the economic substance requirements in relation to a relevant activity.:
• Must conduct the relevant core income generating activities in the UAE.
• Must be directed and managed in the UAE.
With reference to the level of activities performed in the UAE:
Have adequate number of qualified full-time employees in the UAE
Incur an adequate amount of operating expenditure in the UAE
Have adequate physical assets in the UAE.
A relevant entity that only undertakes a Holding Company Business will be subject to less stringent economic substance requirements. Additional requirements will be applicable if the relevant entity carries out high risk IP-related activities. If a relevant entity carries out more than one relevant activity, the economic substance requirements must be met for each of the activities.
What is the reporting requirement under the regulation?
• The company needs to file ESR notification with the respective authority under which the company is registered.
• The company needs to file an annual return within 12 months of the end of the financial year or as stipulated by the relevant authority.
Penalties for non-compliance
Administrative penalties of not less than AED 10,000 but not exceeding AED 50,000 in the first year, increased to an amount not less than AED 50,000 but not exceeding AED 300,000 in the subsequent year, subject to a six-year limitation period. Additional penalties such as suspending, revoking or not renewing the UAE Relevant Entity’s trade license could also be imposed on failure to comply.
Accruon consultant – The best ESR Filing Company in UAE can help you with:
We can support you in assessing the applicability along with the impact of the new legislation on your business by providing a preliminary assessment of your company’s current compliance obligations.
We can help you to define a strategy and implement a plan of action in order to mitigate any risks that are anticipated.
We will ensure that your company complies with its administrative and statutory responsibilities.
Accruon consultant will assist you in filing the notifications and the final report.
We will support you with your obligations and help focus on your field of work.
If you’re looking for ESR filing and compliance services in UAE, you don’t have to look at other options as we are the best.
ESR Filing Company in Dubai, UAE – ESR Dubai, UAE