Economic Substance Regulations in UAE

The UAE was added to the European Union list of non-cooperative tax jurisdictions by the European Commission and this was the reason behind the issuance of the economic substance regulations.

Economic substance registration (ESR) is of the many initiatives taken by the UAE with regards to the requirements of the Organization for Economic Co-operation and Development (OECD). The Registrar of Companies (“Registrar”) is the Regulatory Authority designated in the DIFC for the UAE Economic Substance Regulations (“ESR”). This guideline is generally issued in countries that do not have corporate taxes for complying with international initiatives in response to harmful tax practices. The main Aim of ESR is to ensure UAE is conducting activities that report actual profits in proportion to the economic activity. The Regulations and guidance apply in all UAE jurisdictions, including financial free zones such as the DIFC.

As per the ESR norms all DIFC firms that conduct one or more ‘relevant activities are required to file an Economic Substance Notification or Economic Substance Report electronically on the Ministry of Finance portal, even if they have submitted the same in the DIFC portal. The main aim of ESR is that it helps in complying with the requirements of entities incorporated in the UAE to show that the companies are conducting economic activities in the UAE.

Risians Accounting & Auditing is here to make your work easy! We are one of the best auditing and accounting firms in Dubai. We are trained to take care of all your financial needs and provide you with specified accounting and auditing services. We help companies to manage their ESR filing and help submit the ESR reports to the authorities on time.

Economic substance regulations UAE will be applicable to onshore and free zone companies that engage in any of the below mentioned “Relevant Activities”;

1. Banking Businesses as licensed in the State, including Banking Businesses licensed in a Free Zone or a Financial Free Zone.
2. Insurance Businesses as licensed in the State, including Insurance Businesses licensed in a Free Zone or a Financial Free Zone.
3. Investment Fund Management Businesses as licensed in the State, including Investment Fund Management Businesses licensed in a Free Zone or a Financial Free Zone.
4. Lease-Finance Businesses as licensed in the State, including Lease-Finance Businesses licensed in a Free Zone or a Financial Free Zone.
5. Headquarters Businesses as licensed in the State, including Headquarters Businesses licensed in a Free Zone or a Financial Free Zone.
6. Shipping Businesses as licensed in the State, including Shipping Businesses licensed in a Free Zone or a Financial Free Zone.
7. Holding Company Businesses as licensed in the State, including Holding Businesses licensed in a Free Zone or a Financial Free Zone.
8. Intellectual Property Businesses as licensed in the State, including Intellectual Property Businesses licensed in a Free Zone or a Financial Free Zone.
9. Distribution and Service Centers Businesses as licensed in the State, including Distribution and Service Centre’s Businesses licensed in a Free Zone or a Free Zone.

Notifying & Reporting in all the free zones

Businesses operating in the UAE's free zones are required by law to keep the appropriate authorities apprised of their operations and any significant occurrences that occur within the zones. Each free zone in the United Arab Emirates or UAE has its own regulatory structure and reporting and notification procedures to promote effective governance, transparency, and compliance. Several free zones may be found in Dubai, Abu Dhabi, Sharjah, and the other emirates of the United Arab Emirates. The basics of reporting and alerting stay the same from one free zone to the next, even if the details of the rules and processes change.

In order to operate legally and avoid penalties or other consequences, enterprises operating within the free zones of the UAE must comply with the notifying and reporting requirements. It is critical for companies to be aware of and adhere to the requirements of the free zones in which they operate. It is essential for compliance to stay up with the legislation, consult with experts like Risians Accounting for mainland and freezone consultation, and preserve precise records. Companies operating in the UAE's free zones that abide by their reporting and notification requirements create an environment that is trustworthy to investors, consumers, and other stakeholders.

What We Do?

1. Review group structure to underpin the applicability of economic substance regulations
2. Perform a gap assessment to identify the current level of compliance requirements that include review of – contracts, details of assets, expenditure, and employees living in UAE etc.
3. Determine remedial options by restructuring the business / operations / holdings.
4. Design policies that comply with the economic substance tests.
5. Preparation and submission of annual notification requirements for the entities allowed to carry out a ‘Relevant Activity’ within the UAE.
6. Preparation and submission of economic substance reports for entities carrying out Relevant Activities in the UAE and earning income therefrom.
7. Training sessions to educate personnel on the requirements.

Why Choose Us?

We Offer the Following Services to Comply with ESR:

1. We conduct a systematic study on the business activities and provide guidance in complying with ESR
2. Compliance tests and economic substances tests are done to check the adherence with the regulations
3. Provide supervision on the contractual agreements whether ESR laws are included or not
4. Submit ESR reports to the regulatory authority on time
5. Our other services are Business Services, Accounting & Bookkeeping Services, Auditing Services, Tax & VAT Filing Services and Due diligence Services to the business tycoons in Dubai

Need to know more about Economic Substance Regulations? Contact Us! Our experts will give you a one-hour free consultation on your queries.