On 30 April 2019 the Economic Substance Regulations were issued by UAE as per the Cabinet of Minister Resolution Number 31 of 2019. In addition, help for the utilization of Economic Substance Regulations UAE was also proposed on 11 September 2019 as per the Ministerial Decision Number 215 of 2019. Amendments to the Economic Substance Regulations were made on 10 August 2020 by Cabinet of Minister Resolution Number 57 of 2020, and help for the utilization of those changed Economic Substance Regulations were given on 19 August 2020 by Cabinet of Ministers Resolution Number 100 of 2020. ESR keep up with and represent the financial presence of onshore and free zone organizations who practice any of the “Relevant Activities” in the UAE comparative with the Economic Substance Test.
According to ESR filing UAE, the Licensees and Exempted Licensees should file a ESR Notification to their respective Regulatory Authorities for the relevant Financial Year. To File ESR Notification they are required to submit:
- the nature of the Relevant Activity being carried out.
- whether it generates Relevant Income.
- the date of the end of its Financial Year.
- any other information as may be requested by the Regulatory Authority.
Companies that are Exempted Licensees require ESR Filing as well as the submission of documents to verify their exempt position claiming to be an Exempted Licensee for each financial year.
According to Article 6.7 of Ministerial Decision 100, the Economic Substance Regulations Filing must be submitted by the Licensee or Exempted Licensee electronically on the Ministry of Finance Portal within six months from the end of the Financial Year. According to Article 4.4 of Ministerial Decision 100 of the ESR, those Licensees who have submitted an ESR Notification directly to their respective Regulatory Authorities should re-submit a Notification electronically on the Ministry of Finance Portal once available.
Read also : Economic Substance Regulations Notification Form
The Post submission Problems faced by the Licensees and Exempted Licensees after filing an ESR Notification and their solutions are as following:
1. ESR Notification is Filed Twice
The post submission problem faced by some Licensees and Exempted Licensees includes filing their ESR Notification two times. This mostly happens when the applicants can not see their ESR Filing on the dashboard of the Ministry of Finance portal therefore they undergo filing another ESR Notification. The Licensees and Exempted Licensees can avoid this problem by saving their ESR Filing on submission key, or they can take a screenshot of their portal in order to correspond with the Federal Tax Authority in the future. Moreover, when the first ESR Filing is not to be seen on the dashboard of the portal, the Licensees and Exempted Licensees can send an email to the Federal Tax Authority explaining their problem rather than filing twice.
2. Double Appearance of ESR Report
The Licensees and Exempted Licensees who undergo filing ESR Notification more than once comes up with the problem that their ESR Report appears twice on the dashboard of Ministry of Finance portal. This mostly happens when the applicants can not see their ESR Filing on the dashboard therefore they undergo filing another ESR Notification, or when they face an error and, instead of solving the error, the applicants file another ESR Notification. As a result, there would be double appearance of ESR report.
It is to be noted that if the applicants have submitted another ESR Notification, then they must send a mail to Federal Tax Authority to remove the previous notification. A Licensee who files two ESR Notification will submit one ESR Report. Because of that the Federal Tax Authority may levy a penalty, but the Licensees can apply for a penalty appeal. When the Licensee provides sufficient documents and evidence for the appeal, the Federal Tax Authority will waive off the levied penalties.
3.Request of Federal Tax Authority to submit Supporting Documents
After filing ESR Notification the Federal Tax Authority requests the Licensees and Exempted Licensees to submit supporting documents or additional information for enough evidence. The Federal Tax Authority requests for supporting documents in order to know more about the Licensees and Exempted Licensees’ Core Income Generating Activities, details about their full-time employees, or evidence to prove their exempted status etc. The Licensees and Exempted Licensees are required to submit the information before the deadline to avoid imposition of ESR penalties.
4. Submission of Inaccurate Documents to National Assessing Authority
It is highly recommendable to the Licensees and Exempted Licensees to ESR Notification or ESR Report with great care and should make sure that the documentations are without any errors. The supporting documents submitted in the ESR Notification or ESR Report should be accurate, or otherwise they will be imposed with an ESR administrative penalty of AED 50,000. However, if the applicants identify any errors in the documents, they should request for an ESR amendment rather than to file another notification.
You should know : How to submit Economic Substance Regulations Appeal Request
The Licensees and Exempted Licensees under Economic Substance Regulations can not stay content even after submitting all the necessary ESR requirements. Post submission problems like filing ESR Notification twice come up when the organizations do not stay vigilant. Moreover, many of these problems may lead to heavy ESR administrative penalties if the organizations fail to resolve them on time.
For expert guidance and full compliance on your ESR requirement in UAE , Contact Economic Substance Regulations!