Economic Substance Regulations | Spectrum Accounts
What is all about ESR?
As part of the UAE’s commitment being a member of the OECD Inclusive Framework, in response to an assessment of the UAE’s tax framework by the European Union (“EU”) Code of Conduct Group on Business Taxation, the UAE introduced a Economic Substance Regulations in April 2019 and replaced them in August 2020.
What are the 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
Once a UAE company has been identified as undertaking relevant activities, the Economic Substance Regulations requires the company to satisfy the economic substance test which comprises three elements:
1). It is directed and managed in the UAE in relation to that activity
2). It conducts Core Income-Generating Activities (CIGA) in the UAE
3). It meets the adequate requirements with regard to the level of relevant activity carried on in the UAE.
What is expected if ESR is applicable to your business?
If you are carrying out the relevant activities and you are earning income out of it, you need to;
- Submit ESR notification
- Submit ESR report and
- Make the necessary changes in the way you operate the business if you are not managing it the way it is needed as per the law
What are the due dates for submission of the ESR notification and ESR Report?
Notification and Economic Substance Regulations Report should be submitted with the relevant authority with 12 months from the end of the financial years beginning on after 1st January 2019.
How can Spectrum Auditing facilitate you in complying with ESR?
- Spectrum Auditing Services in Dubai can assist you in assessing whether ESR is applicable to your business or not
- We can assist you in submitting the ESR notification
- We can assist you in bringing the necessary changes in organising your business to be able to comply with the requirements of ESR
- We can assist you in submitting the ESR return
- We can assist you in submitting an appeal against the penalties that are already levied in relation to ESR compliance
What to do now?
Let us know if you want us to help in complying with the above mentioned Economic Substance Regulations requirements and avoid the risk of getting penalties levied on your business. Book an appointment today to know further.
