Economic Substance Regulations (ESR)
The UAE Economic Substance Regulations
The UAE introduced Economic Substance Regulations pursuant to Cabinet of Ministers Resolution No. 31 of 2019(“Regulations”) on 30 April 2019. Guidance on the application of the Regulations was issued on 11 September 2019 pursuant to Ministerial Decision No.215 of 2019 (“Guidance”).
The Regulations require companies and other business forms registered in the UAE that carry on one or more “Relevant Activities” (together, “Relevant Activities”), to have economic substance in the UAE in relation to these activities, and to comply with notification and return filing obligations. Such businesses are referred to in the Regulations and this document as “Licensees”.
To support UAE businesses in understanding the scope and application of the Regulations, this article provides additional guidance on the “Relevant Activities” and their associated “Core Income-Generating Activities” (“CIGAs”).
Penalties for Non-Compliance
- Failure to comply with the ESR (including providing inaccurate or incomplete information) may result in fine of between AED 10,000 and AED 50,000 in any fiscal year for a failure to demonstrate an actual economic activity. The fines increase to between AED 50,000 and AED 300,000 for the subsequent fiscal year.
Providing support when you need it
In this regard, the tax team at MARKEF is extending its support to all businesses in conducting:
- Economic Substance Impact Assessment for UAE entities
- Assistance in Filing Economic Substance notification
- Assistance in Filing Economic Substance Return