ESR in UAE | Economic Substance Law UAE:
The deadline for the first ESR notification is June the 30th, 2020. All UAE Licensees (mainland, freezone, and offshore entities) are mandated to ascertain their compliance with ESR before the deadline.
In this respect, all Licensees are subject to file an ESR Notification if they carry out any of the following Relevant Activities:
- 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 – In Detail
If you conduct business in the UAE or hold shares in a UAE entity, whether or not you operate a relevant activity in the face of your license, we strongly recommend that you audit your corporate structure.
In this respect, UAE entities need to implement their self-assessment to determine whether they are in compliance with the new Economic Substance legislation by undertaking a 3 stages procedure:
- Preliminary Scope Test (Substance over the form test): Is your UAE entity within the scope of ESR? Is your entity subject to ESR?
- ESR Test: Is your UAE entity meeting the ESR Requirements?
- ESR compliance upgrade: what are the means to reinforce the economic corporate substance of your entity to the adequate required level?
Penalties will be applied for non-compliance to ESR:
- Administrative financial penalties (up to AED50,000 for the first failure to pass the economic substance test, failure to provide information or provision of inaccurate information to Regulatory Authority and up to AED300,000 for the second time failure) under a statute of limitation of 1year or 6 years
- Exchange of information with the foreign tax authorities of the states where their parent company, ultimate parent company and UBO’s are resident
- Refusal to renew, suspension, or revocation of entities ‘licenses by the authorities.
The authorized personnel of the Regulatory Authority may at any reasonable hour enter Business Premises to examine and take copies of any Business Document located there.
How can we assist you?
Wincore Advisory Group DMCC can assist you in this regulatory self-assessment to fulfill your compliance with your legal responsibilities by:
- Providing you with a clear view of the new regulations and your entity’s categorization
- Reviewing your internal corporate governance, Management information system and ESR criteria fulfillment
- Implementing the most cost & time effective compliant strategy (implementing contractual and delegation arrangements) to help you pass the economic substance test
- Providing you with corporate secretarial services, non-executive directors to fulfill your needs at the light of the new regulations
Outsourcing this function to the Wincore Advisory Group enables you to meet your obligations in the most efficient way and avoid wasting valuable time and energy in establishing an in-house process.