26 May 2022 - This note provides an overview of the upcoming Economic Substance (ES) compliance and filing obligations in the United Arab Emirates (UAE).
The United Arab Emirates (UAE) Economic Substance Regulations (ESR) require certain domestic and free zone legal entities that conduct one or more of nine relevant activities (RA) (referred to as “licensees”) to comply with annual filing
requirements, as follows:
The below table outlines the upcoming deadlines for a selection of FY ends:
FY end |
Filing deadlines |
|
Notification |
Report |
|
31 Dec 2021 |
30 Jun 2022 |
31 Dec 2022 |
31 Mar 2022 |
30 Sep 2022 |
31 Mar 2023 |
30 Jun 2022 |
31 Dec 2022 |
30 Jun 2023 |
30 Sep 2022 |
31 Mar 2023 |
30 Sep 2023 |
31 Dec 2022 |
30 Jun 2023 |
31 Dec 2023 |
All legal entities are encouraged to determine their upcoming ESR filing obligations as soon as possible for any completed FYs and take necessary steps to ensure filings are made within the applicable deadlines and all necessary supporting documentation is available at the time of the filing.
Penalties for noncompliance with the ESR include financial penalties for the failure to submit a notification (AED 20,000), submit a report (AED 50,000), provide accurate or complete information (AED 50,000), and demonstrate sufficient economic substance in the UAE (first failure is AED 50,000 and second consecutive instance of failure is AED 400,000). Nonfinancial penalties include information exchanges with certain foreign authorities. The Federal Tax Authority (FTA) has begun to initiate audits.
All legal entities should consider the following ESR matters and ensure action is taken, where relevant, before the end of a FY:
The purpose of the above (non-exhaustive) guidance is to provide entities with an opportunity to take any necessary actions to comply with the ESR before it is too late.
The Ministry of Finance (MoF) has a designated homepage for ESR. The legislation, guidance, notification and report templates as well as a link to the ESR Portal may be accessed via this link.
Deloitte has developed the first of its kind ES guide with a view to support UAE businesses with their reporting obligations. If you are interested in the guide, a sample version is available on the following link. Alternatively, if you would like to purchase a copy of the guide, please get in touch with us on the following email ID: Deloittetaxme@deloitte.com.