Complying with the Economic Substance Regulations (ESR) in the UAE is a challenging process. Navigating the complexities of ESR in the UAE requires expertise, precision, and prompt compliance.
Jitendra Chartered Accountants (JCA) can help you by conducting a robust ESR assessment. Our ESR Assessment Services in Dubai help you determine whether your business complies with the standards set by the UAE Authorities in line with the Organization for Economic Cooperation and Development (OECD).
What is Economic Substance Regulation?
The UAE introduced ESR to comply with standards for combating base erosion and profit shifting. ESR requires the companies that carry out relevant activities to demonstrate they have adequate substance and legitimate operations in the UAE.
The Nine Relevant Activities under the ESR are:
- Banking Business
- Insurance Business
- Investment Fund Management Business
- Shipping Business
- Lease-Finance Business
- Distribution & Service Center Business
- Headquarters Business
- Intellectual Property Business
- Holding Company Business
ESR Requirements for UAE Businesses
Mainland, free zone and offshore companies need to meet the key ESR requirements in the UAE such as:
- Notify the regulatory authorities which relevant activities they are carrying out within 6 months from the end of financial period
- Undergo the Economic Substance (ES) Test, if they carry out relevant activities and
- Submit an annual Economic Substance Report within 12 months from the end of financial period
The Penalties for Non-Complying with the Law:
- AED 20,000 – Non-submission of the Notification.
- AED 50,000 – Non-submission of the ES Report or documents and failure to meet ES Test.
- AED 400,000 – Repeated violation of Point No. 2
- AED 50,000 – Submission of inaccurate information.
The Following Tests must be Passed to Meet the ESR Test:
- Core Income Generating Activities’ (“CIGA”)
- Directed and Managed
- Adequate
- Outsourcing OF CIGA (Applicable if outsourcing is done)
What is ESR Assessment in the UAE?
Businesses need to determine whether they fall within the scope of ESR compliance in the UAE. The process of assessing this eligibility is called ESR assessment in the UAE.
JCA is one of the leading providers of ESR assessment services in Dubai, UAE. Our ESR advisers in Dubai can help you make certain whether you satisfy the economic substance test.
Purpose of ESR Assessment Services in Dubai, UAE
JCA’s ESR Services in the UAE constitute an assessment to answer questions such as:
- Is your business conducting a Relevant Activity in the UAE?
- Are your business eligible to claim any ESR exemption in the UAE?
- Will your business be rated as high-risk for ESR in the UAE?
- Does your business meet the ESR test in the UAE?
Our Economic Substance Assessment Services
We offer a comprehensive suite of services tailored to your business needs to ensure full ESR compliance:
- Initial Assessment
We conduct an in-depth analysis of your business activities to determine whether your company falls under the scope of the ESR. This initial assessment helps you understand the obligations and requirements specific to your business.
- Gap Analysis
Our experts will evaluate your current operational structure against the requirements of the ESR to identify any gaps. We will then recommend the necessary steps to align your business with these regulations.
- Economic Substance Report Preparation
We assist in preparing and submitting the Economic Substance Report, ensuring all relevant information is accurately reflected and meets the UAE regulatory standards.
- Ongoing Compliance Monitoring
Compliance with ESR is an ongoing process. We provide continuous monitoring and support to ensure your business remains compliant year-round. This includes regular updates on any regulatory changes and their impact on your business.
- Advisory Services
Our team of experts is on hand to provide tailored advice on structuring your operations to optimize economic substance compliance while maintaining operational efficiency.
Why Choose JCA for ESR Assessment in the UAE?
Expertise: Our team consists of seasoned professionals with extensive experience in UAE regulatory compliance, ensuring that your business receives accurate and reliable guidance.
Tailored Solutions: We understand that every business is unique, and our services are customized to fit your specific needs.
End-to-End Support: From the initial assessment to ongoing compliance, we provide comprehensive support to ensure your business remains fully compliant with ESR.
Timely and Accurate Filing: We guarantee timely and precise submissions to avoid penalties or compliance issues.
Frequently Asked Questions (FAQs)
What is the purpose of the UAE Economic Substance Regulations (ESR)?
The UAE ESR regulations were introduced to align with global standards set by the OECD and EU to prevent harmful tax practices. The regulations require UAE entities conducting certain “relevant activities” to demonstrate sufficient economic substance within the UAE, ensuring that profits are in line with the economic activities conducted.
What happens if a business fails to comply with the ESR?
Non-compliance with the ESR can result in significant penalties, including fines, reporting to foreign tax authorities, and even license revocation.
How can I determine if my business needs to comply with the ESR?
You should conduct an initial assessment of your business activities to determine if they fall under the scope of the ESR. If your business is involved in any of the specified relevant activities, you must comply with the regulations.
What does an Economic Substance Assessment involve?
An Economic Substance Assessment involves evaluating your business activities, operational structure, and substance in the UAE to ensure compliance with ESR. This includes determining whether your business falls under the scope of the regulations, identifying any gaps in compliance, and assisting in preparing and submitting the necessary reports.