The UAE introduced the ESR to fight against tax avoidance and ensure that the companies operating within its territory have a proper substance in the economy. Such relevant activities mean that the companies must adhere to these rules, and any business conducting such activities is expected to submit an ESR every year. This write-up provides a clear understanding of ESR reporting requirements for companies based in the United Arab Emirates. Economic Substance Regulation UAE is an authorized body that can assist you in confirming that everything regarding ESR reporting is clear for your business, according to the rules set in the ministry.
Who Must know the ESR reporting requirements in the UAE?
Companies with UAE registrations that participate in any of the following “relevant activities” must submit an ESR: Any company, which has registration in UAE and is involved in any one of the following activities referred to as ‘‘relevant activities’’, must file an ESR:
- Banking Business
- Insurance Business
- Investment Fund Management Business
- Lease-Finance Business
- Headquarters Business
- Shipping Business
- Holding Company Business (with certain limitations)
- Intellectual Property Business
- Distribution and Service Centre Business
It’s crucial to keep in mind that companies that conduct certain necessary activities inside free zones could still be required to abide by ESR regulations. If you would want more information on whether your business is required to file electronically, you should see a licensed tax professional.
ESR Reporting Requirements: Deadlines and Schedule
Companies have a deadline for submitting their yearly ESRs. The main deadlines are broken down as follows:
- Economic Substance Notification: Companies must file an Economic Substance Notification no later than six months following the conclusion of their fiscal year. This notification briefly details the company’s activities and serves as the first signal.
- Economic Substance Report: Within a maximum of twelve months following the conclusion of the company’s fiscal year, the ESR itself must be electronically submitted on the Ministry of Finance’s ESR webpage.
Which Data Must Be Presented in an ESR Report?
The ESR serves as a thorough analysis that illustrates the financial strength of a business in the United Arab Emirates. Usually, it needs information on the following aspects:
- General Information: Name, Commercial Registration number, and business contact details.
- Information on any branches that may be found in the United Arab Emirates.
- Reportable/Financial Period: The fiscal year the report covers.
- Updated Information: Any modifications made throughout the year to previously supplied data.
- Financial Information: Information about the company’s earnings, outlays, workforce, and tangible assets in the United Arab Emirates may be needed for this part. The particular requirements may change based on the nature f the activity in question.
- Relevant Activity Information: A thorough justification of the pertinent activity the business engages in within the United Arab Emirates. This refers to the kind of activity that is done, the services that are provided, and the environment in which the task is performed.
- Ownership Information: Any details of the identity of the individuals who shall be liable for the beneficial control of the business and the corporate ownership structure.
- Management and Control: Details on the UAE-based management and control of the company. This could include information on the decision-making process’s location, important employees’ training and work history, and the specifics of any outsourcing agreements.
- Proclamations: The company representatives must sign off on declarations confirming the accuracy of the information provided and acknowledging their understanding of the ESR requirements.
How to Complete an ESR Form under ESR reporting requirements in the UAE
The Ministry of Finance’s ESR portal electronically completes the ESR filing process. To finish and submit their ESR, businesses must first register on the platform and gain access to the necessary forms. The portal provides tools and advice to help companies with the filing procedure.
Applicable penalties for failure to comply with ESR guidelines in the UAE
Businesses face severe fines if they don’t follow the ESR filing requirements. These sanctions may consist of:
Fines ranging from AED 10,000 to AED 500,000 for discovering and publicly humiliating noncompliant enterprises. Possibility of limitations when conducting business in the UAE.
Extra Things to be kept in consideration for ESR requirements in the UAE
A few extra things that one must keep into consideration are discussed below-
- Keeping Records: To verify the information in their ESRs, businesses must keep sufficient records for at least five years. Financial statements, contracts, and personnel records are a few examples of these records.
- Seeking Professional Guidance: Depending on the type of your organization and its activities, the ESR framework can be complicated and have different requirements. Ensuring accurate and timely reporting compliance can be facilitated by seeking advice from a trained tax advisor with ESR expertise.
Economic Substance Reporting UAE can help you meet the UAE’s ESR reporting requirements.
For companies doing business in the UAE, it is essential to comprehend and abide by ESR reporting regulations. Firmly finishing and filing their ESRs on schedule shows that a company is committed to economic substance and helps them stay out of trouble. The government of the United Arab Emirates provides materials and guidelines to help enterprises file their ESRs. A tax advisor such as Economic Substance Regulation UAE is a great resource for any specific queries about your business or for more clarification. So, contact us today to get your ESR
