Economic Substance Regulations (ESR)

What is ESR?

The Economic Substance Regulations (“ESR”) was first introduced in the UAE in April 2019 through Cabinet Resolution No. 31 and was recently amended by Cabinet Decision No. 57, along with the updated guidance (Ministerial Decision No. 100 of 2020) in September 2020. The Amended ESR applies retrospectively from 1 January 2019. The ESR requires UAE onshore and free zone companies that carry out “Relevant Activities to maintain and demonstrate an adequate “economic presence in the UAE relative to the activities they undertake i.e. ES Test.

An annual ES Notification is required to be submitted by Licensees (including Exempted Licensees) within six months from the end of the relevant financial period. For entities that undertake a “Relevant Activity”, they will also be required to submit a full ES Report within 12 months from the end of their financial year

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Provide an overview of latest requirements related to ESR in the UAE Highlighting Core Income Generating Activities (“CIGA”) for trade licensees/businesses to report to the Ministry of Finance (“MoF”) and providing recommendation where CIGA is not met by the entity. Identify gaps in the current activities mentioned in the trade license as compared to the ESR and providing recommendations considering the latest ESR requirements for each trade license (this will be in the form of a red flag report). Provide an overview of filing obligations specific to your sector/trade license. Highlight penalties and exposure for non-filing of ESR Notification/Report, and highlighting important filing dates and compliance requirements for each trade license. Conclude whether the company would be exempt or subject to ESR reporting for FY21

Compliance services related to ES Notification, we will assist in drafting the ES Notification to be submitted on the Ministry of Finance (MoF) ESR portal. We will also assist in obtaining supporting documentation to support its exempt status (if applicable).

Compliance services related to ES Notification, we will assist in collating required information and documents for filing the ES report through the MOF Portal, as well as reviewing information/data provided. (ES Report filing is only applicable in case the business conducts CIGA as per the Cabinet Decision)

Identify the grounds which a Licensee may submit an appeal against the penalty on. Assist in collating required information to draft the official letter to be submitted on the Ministry of Finance (MoF) ESR Portal. Follow up with the respective regulatory authorities with regards to:
Amendment of Economic substance notification or report
Cancellation of duplicate requests/filings

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