ESR Compliance Services

ESR Compliance Services in UAE

Economic Substance Regulations - ESR compliance in UAE is a mandatory requirement. ESR in UAE ensures you do not adopt tax evasion and avoidance strategies to save your money. By following ESR regulations, you prove that your core business activity is in UAE. You are generating revenues from it, and paying relevant taxes in the country. So, it is mandatory for entities to show their UAE ESR compliance.

FAME has been helping its clients with ESR compliance in the UAE. We help you analyze the need for UAE ESR compliance for your business. Our ESR specialists also handle the submission of ESR notifications and ESR returns. Thus, you get end-to-end services to ensure your compliance with ESR UAE.

You can enjoy hassle-free compliance with ESR in UAE with our guidance. UAE ESR compliance helps improve your company goodwill and prevent tax-specific issues or penalties. It lets you contribute to the country’s economy and ensure fair competition.

Reach out to our consultants for expert process guidance.

The purpose of ESR in UAE

Many jurisdictions have no corporate tax or low taxation. Businesses, specifically MNCs, try to take advantage of these tax benefits by showing their profits in these jurisdictions instead of their actual base. Thus, despite their main base and substantial activities in some other countries, they show their profits in jurisdictions with little to no tax to benefit.

Economic substance regulations aim to prevent such actions by MNCs. Since the UAE has lower taxes, the government introduced ESR in the UAE in 2019. In April 2019, the UAE implemented the Economic Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019). Later, they also introduced the Guidance on implementing the Regulations in September 2019 (Ministerial Decision No. 215 of 2019).

UAE ESR compliance is mandatory for reported entities. Accordingly, firms must perform an Economic Substance Test and submit relevant reports every year. They must also file a notification for it. All these are essential to show your economic activity in the country concerning relevant activities.

By submitting the ESR notification and ESR return, businesses can prove that they carry out core income generating activities in UAE and have substance. The UAE aims to fight tax evasion and tax avoidance by implementing these regulations.

Thus, with ESR in UAE ,the government aims to stop fraudulent tax practices in international trade activities in alignment with the OECD’s international commitment to remove unfair tax practices. It also ensures correct tax payments and facilitates businesses engaging in legal business practices.

It is critical for reporting entities to achieve ESR compliance in the UAE. Reporting entities include businesses in mainland, free zone, and offshore UAE carrying out relevant activities and core income generating activities in the following verticals:

These entities can be LLCs, private and public shareholding companies, partnerships, and any other entity legally independent of the owner. Natural persons, sole proprietorships, trusts, and foundations are exempt.

Our UAE ESR compliance services

FAME is an expert in providing compliance services in various areas in the UAE. Our professionals help you comply with AML, VAT, and corporate tax regulations. Besides, our UAE ESR compliance services are a hit with our clients. We help you by providing support in the following aspects:

We help you by providing support in the following aspects:

Checking ESR eligibility

You must find whether economic substance regulations are applicable to you or not. By checking your eligibility for ESR, you can know whether you need to follow its requirements. Its requirements include submitting an ESR notification and an Annual Return.

FAME helps you with eligibility check. We study your business and understand the nature of your business activities. An assessment of the different types of transactions you conduct across the UAE is essential. Based on this assessment, we classify your activities as relevant or not under ESR regulations.

Gap analysis and remedial actions

Your ESR compliance in UAE might suffer from deficiencies. Either the reports are not in order, or not submitted on time, or you have not performed the test. In these cases, you must understand that there are gaps and you need to fill them for ESR compliance in UAE.

Our ESR experts can identify these gaps and correct them With respect to your core income generating activity, there might be loopholes in the data points required to be submitted. For example, the exact data and information related to conducting a relevant activity, revenues, expenditure, number of employees, etc., are critical data points, which need accurate handling.

We recommend necessary actions if we find any gaps related to ESR test parameters. These remedies can be in the direction of legal, commercial, or regulatory sense. You receive end-to-end handholding in implementing these remedial measures.

ESR compliance services

Per the regulations of ESR in UAE, you must submit the ESR notification no later than six months after the end of the financial year. Also, you must file the ESR report annually before the end of the 12 months after the financial year. ESR compliance services include submission of accurate reports on time.

With timely and correct submission, you prove your relevant activities in UAE. You show that your income is subject to tax in UAE and declare if otherwise. These reports also show that you have adequate resources to carry out these core income generating activities.

The ESR notification includes the following points:

The ESR reportincludes the following elements:

With our expert help, you can file the notification and report accurately in the prescribed format. We ensure you manage these compliance requirements on time without any hassles.

Concerned about accurate and timely ESR compliance in the UAE?

FAQs: ESR Compliance Services

What are the main activities under ESR UAE?

ESR compliance in UAE requires you to perform the following three activities:

Conduct an Economic Substance Test to prove your substance
Submit an ESR notification within six months of the end of the reporting period
Submit an Annual Substance Return within 12 months of the end of the reporting period

To which entities is ESR in UAE not applicable?

The following entities are exempt from UAE ESR compliance:

Investment funds and their underlying investment holding entities or special purpose vehicles
A branch of a foreign entity, subject to tax outside the UAE
Non-UAE tax resident entities
An entity with one or more UAE residents as owners, not a part of MNC Group, and carrying out business in UAE
Any other licensee, if the Ministry of Finance determines it exempt

Do you have relevant expertise in ESR compliance in the UAE?

Yes, we have the expertise and the experience to deal with all UAE ESR compliance services. Our experts are from the fields of taxation, legal, economics, finance, and business analysis. They stay up-to-date with all ESR regulations, rules, and guidelines. Through such updated, accurate, and on-time ESR compliance services, we help you adhere to ESR in the UAE.

What penalties do we have to pay in case of non-compliance with ESR?

The following are the penalties under ESR in UAE:

If you fail to file the notification report, the penalty is AED 20,000.
If you fail to file the annual return report, the penalty is AED 50,000.
If you provide incomplete or inaccurate information, the penalty is AED 50,000.
If you fail to meet Economic Substance tests, the penalty is AED 50,000 for the first year. In the second year, the penalty is AED 400,000, along with suspension, cancellation, or non-renewal of trade license.