To address concerns regarding entities having too little substance while operating in United Arab Emirates (UAE) jurisdictions, the Ministry of Finance has sought to implement Economic Substance Regulations in the Cabinet Ministry Resolution (No 31) of 2019.
The newly introduced regulations apply to legal or natural persons licensed in carrying out any relevant activity as per the Cabinet Resolution. This includes licensees that are operating in and out of UAE free zones, offshore free zones, and financial free zones. ESR is applicable to financial years starting from the 1st of January 2019.
At Farahat & Co., we can provide assistance in navigating the UAE economic substance requirements that are to be met by affected business entities. The firm offers a broad range of services from advisory services on the registration status with regulators to classification checks, full reviews, and report filings
With the help of our team of experts, Farahat & Co. aims to help all of its clients in determining whether their businesses are affected by the substance legislation. To find out if a business is fully in compliance with substance requirements set forth by applicable authorities, it is necessary to determine whether it’s within the legislation’s scope or not, which can depend on a variety of factors including the activities of the business, company’s residence, and other important aspects of the business model.
Our team can help you assess the status of your business in the most effective and convenient manner. We can also offer a full understanding on steps that your business should consider taking to make sure it is fully complying with Economic Substance Regulations.
Our ESR solutions provide businesses in UAE with effective and efficient services for them to gain clarity regarding the applicability of the regulations onto their businesses, supported by a detailed analysis performed by seasoned professionals and tailored solutions which are prescribed by our team of experts.
our team offers clients with a detailed diagnosis on the classification of a business, identify all the reporting obligations of the business, and propose concrete recommendations on the next steps the business has to take
With a team of inhouse experts on legal matters in UAE, we are able to take into full consideration the risks and needs of businesses related to compliance with the Economic Substance Regulations
You can have an assessment scheduled for your business today simply by contacting our team. In the consultation and assessment, you will only be required to provide a relatively short amount of your time to help us classify your business.
after assessments that are undertaken by our experts, our team will also help you submit the reports and other documents which are mandated of businesses that are affected by the legislation. We can help with the notification filing to relevant licensing authorities and provide you with expert guidance in the annual reporting which is necessary to avoid penalties. Additionally, we can provide updates on deadlines that are applicable to your business on report filing and all other changes to the legislation so you are kept informed and up-to-date on legal matters that affect your business operations in the UAE.
Take note: as per the Cabinet Resolution introduced on the 30th of April 2019 related to Economic Substance, a business has to meet a test for economic substance in relation to relevant activities for every financial period in which the business has earned an income. The test for economic substance requires a business to demonstrate the following:
Failure in complying to the legislation results to AED 10,000 – 300,000 as penalty. This includes first failure for demonstrating appropriate economic substance in UAE for a relevant financial year and second consecutive failure in providing information with foreign competent authorities of a parent company, ultimate beneficial owner or ultimate parent company.
An administrative penalty may also come with the withdrawal or suspension of a company’s commercial or trade license. The license may also not be allowed to get renewed in UAE.
If you want to know more regarding our Economic Substance Regulations services in UAE and how our solutions can help make sure your business minimizes risk and ensure substance compliance, kindly reach out to us today by calling our office in the numbers listed below!
Alternatively, you can also send us an email should you have inquiries regarding substance legislation and any related service.