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How to Fill Economic Substance Regulation Reporting?

Economic Substance Regulation 2021-06-28

The UAE Government has implemented Cabinet Resolution no. 31/2019 with effect from 30th April 2019 on Economic Substance Regulations (ESR) in the UAE. This was followed by the Ministerial Decision 215.  However, the UAE government introduced the economic substance reporting regulation on 1oth august 2020 through Cabinet Resolution 57/2020 which revoked Cabinet Decision no. 31/2019. It’s introduced in the bid to comply with the global standard set by the OECD to stop unlawful tax practices. According to the law, mainland, offshore and Freeland have to show the ESR regarding relevant activities in the UAE. All companies must submit the SER notification within giving a due date to the regulatory authorities.

 

Relevant Activities As Per ESR Law

The ESR law is applicable for all mainland businesses, offshore, and free zones area businesses. If any business generates profit relevant to the below activities, then the business is required to comply with the ESR and report to the regulatory authorities. 

Activities

  • Banking Businesses
  • Insurance Businesses
  • Investment Fund Management Businesses
  • Lease-Finance Businesses
  • Headquarter Businesses
  • Shipping Businesses
  • Holding Company Businesses
  • Intellectual Property Businesses
  • Distribution and Service center Businesses

UAE Government Official Page HERE.

 

ESR Filling For Multiples Companies

It’s common for companies to be part of the group for accounting purposes in the UAE. As per ESR law, it doesn’t allow us to report a single notification for multiple companies. Companies need to fill the notification individually and as it is not valid for groups. To clear the process of the ESR companies can contact  Risians Accounting and get a consultation regarding ESR, business accounting, VAT, etc.

Penalty In Economic Substance Regulation

Filling ESR notification is mandatory for the business before the due date. If the company fails to fill the ESR notification along with the required supporting documents before the due date then they will be penalized. The range of the penalty can be from AED 10,000 to AED 50,000. To avoid such penalties, businesses should get ESR services from experts.

The time period For Reporting ESR Notification

At the time of filling ESR notification, Businesses need to consider the right to notification. As per this law, the report time is calculated as the beginning time of the financial year and after 1st Jan 2019. It’s required for the companies to mention the start and end date of the notification report.

It business was incorporated  on 1st  July 2019  with a 31 March 2020 then the report time will be

 Start date: 1 July 2019

 End date: 31 March 2020

 

If the business financial year similar to the financial year then the report time will be

 Start date: 1 January 2019

 End date: 31 December 2019

 

ESR Notification Requirement For Companies Under Dissolve And Liquidation

If the company has been dissolved and liquidated before the deadline of the filling ESR notification then no need to fill the economic substance regulations report.  If the company is under the process of liquidation then filling ESR report is required. 

 

Guidance And Requirement To Fill Notification

  • According to Article 6.7 of Ministerial Decision 100, It’s required for the companies to submit the ESR notification online on the Ministry of Finance Portal.

  •  Article 4.4 of Ministerial Decision 100 says that all the notifications must be submitted within six months from the end of the financial year.

  • Article 8.4 of Decision 57 says that all the ESR reports must be submitted within twelve months before the end of the financial year.

How To Fill an Economic Substance Report?

It is very easy to submit the ESR notification. Companies need to just create a user account, but before creating an account they need to read the privacy policy regarding registration and login, Privacy policy link

User Registration link.  If you have already created the login to your ESR portal. Login link.

Now you can easily submit your ESR notification report. You can also watch the webinar to use the Economic Substance Filing Portal. Webinar link.

If you want to consult about How to prepare an ESR Notification Report and any other issue then risians accounting ESR service is best for you. Currently, we are providing our ESR service to many businesses in the UAE and saving their business from the plenty. 

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