ESR Notification Deadline on June 30, 2021: A Guide to All Mandatory Steps
Only a week is left for filing the Economic Substance Notification in the UAE. June 30, 2021, is the official deadline given for the UAE companies ( mainland, free zone & offshore) to submit the ESR notification on the Economic Substance Regulations (ESR) portal if your company’s financial year-end is December 31, 2020. If your company has carried out any Relevant Activity in the financial year ending 31st December 2020, it must submit the ESR notification to avoid hefty penalties. At this juncture, the companies need to assess their ESR eligibility quickly for which they can avail the services of top ESR consultants in Dubai.
As the deadline is near, it is imperative that all the steps need to be taken on an ad hoc basis. Performing the steps at the last minute involve a greater risk of filing wrong information which may lead to penalties. Don’t worry, we have given here a list of mandatory steps that will help you file ESR notification in the UAE accurately. Read ahead.
Check your ESR Applicability
A self-assessment is the most critical step you need to undertake before filing the ESR notification. First of all, check whether your company had conducted any of the Relevant Activities in the financial year ended 31st December 2020. The Relevant Activities are Banking Business, Insurance, Shipping Business, Lease & Financing Business, Holding Company Business, Headquarter Business, Investment Fund Management, Intellectual Property Business, and Distribution & Service Business. If your company has conducted any of these activities in the relevant financial year, you fall within the scope of ESR and must file the notification.
Assess whether Licensee or Exempted Licensee?
The next step of assessment will determine whether your company is a Licensee or an Exempted Licensee as defined in the Cabinet Decision No. 57 of 2020. If the company is an Exempted Licensee, it should file the ESR Notification in the UAE. Exempted Licensees need not submit Economic Substance Report if they provide evidence that substantiates their exempted status. The following types of businesses qualify as Exempted Licensees:
a) An Investment Fund
b) A Licensee that is a tax resident in a jurisdiction other than the UAE
c) A Licensee that is wholly owned by one or more residents in the UAE but is not part of an MNC
d) Group and carries out business only in the UAE
e) A Licensee that is a branch of a foreign entity, but its income is taxed outside the UAE
Prepare the Notification with Mandatory Information
Article 8 of the Cabinet Decision requires every Licensee and Exempted Licensee to include the following information in the Economic Substance Notification and submit it to the Regulatory Authority every year:
Relevant Activity carried out by the Licensee or Exempted Licensee during the Relevant Financial Year
- Information on whether the Licensee or Exempted Licensee has generated Relevant Income during the Relevant Financial Year
- The date of commencement and end of the Financial Year
- Any other information or documents as may be requested by the Regulatory Authority
- Exempted Licensees should submit all information and documentation evidencing its status as an Exempted Licensee
Submit the Notification on ESR Online Portal
The Ministry of Finance (MoF) has been designed an online portal through which the Licensees and Exempted Licensees can file ESR Notifications along with the mandatory documents. ESR consultants in Dubai will help the companies easily navigate the complexities of filing ESR notification in the Portal. Companies are required to set up an MoF corporate account to access the ESR Portal. The credentials that are recorded in the corporate account can be used to access the Portal for ESR filing purposes. Licensees and Exempted Licensees that are not registered as corporate users need to set up a fresh account to file the ESR notification.
What if You Fail to File Notification or Commit Errors?
Failing to file ESR notification in the UAE will be considered a severe act of non-compliance, that attracts a penalty of AED 20,000. A penalty of AED 50,000 will be imposed on the entities that provide inaccurate or false information in the ESR Notification. You can save your company from the hefty ESR penalties by utilising the assistance of expert ESR consultants in Dubai.
What if an Exempted Licensee Fails to Submit Evidence for Exempted Status?
If an Exempted Licensee fails to provide evidence to substantiate its exempted status, the Authority will consider it as a Licensee. A Licensee is obliged to submit ESR Report, but such entities will fail to submit the report due to their exempted status. In this case, they will attract a penalty of AED 50,000 for not submitting the ESR Report. A penalty of AED 400,000 will apply if it is repeated in the subsequent year.
File ESR Notification through Jitendra Chartered Accountants
Since ESR Notification filing is an annual obligation, entities should make accurate assessments every year. A company that hasn’t carried out any relevant activity last year also checks whether they have conducted any Relevant Activity in the subsequent financial year. Most companies fail to do an accurate assessment leading to hefty penalties. However, this unforeseen event can be easily prevented with the assistance of top ESR consultants in Dubai such as Jitendra Chartered Accountants (JCA). We have even experienced that some companies do not properly assess their relevant activities by themselves and end up getting high amounts of penalties. We have served companies through appeal for cancelling their penalties with proper documentary justifications.