Mainland, offshore, and free zone firms that are in the business of leasing and financing in the United Arab Emirates are required to comply with Cabinet Resolution (No 31) of 2019 on Economic Substance Regulations (ESR). The “Regulations” are applicable to financial years starting from the 1st of January 2019.
What are the requirements of businesses under ESR in UAE?
Annual ESR notification filing in UAE
Leasing and finance businesses registered and licensed to carry out relevant activities in the UAE are to submit an ESR Notification annually to the local regulatory authority.
The Notification has to be submitted on the electronic portal of the Ministry of Finance. Take note: businesses that undertake relevant activities, including leasing and financing, in the UAE are to ensure all Economic Substance Regulations obligations are satisfied up to the company liquidation. Non-compliance with ESR obligations, including the ESR notification filing in UAE, prior to the deadline will be subject to an administrative penalty of AED 20,000.
For expert guidance and full compliance on your ESR requirements in UAE, contact us here!
Crucial details to furnish during the ESR Notification filing in UAE include:
- Details of the licensee – licensee name, the registration number that’s stated on a business’ commercial or trade license, whether or not the licensee has a dual license, licensing authority, the main or primary regulatory authority which issued the primary trade license of the business, place of establishment, registered office address, legal form, etc.
- Information on VAT registration – should include the tax registration number of the licensee and other VAT-related details
- Branch details – licensees that have branches across the country which carry out leasing and financing activities must report economic activities in one consolidated notification
- Reportable period – the reportable period of a licensee is a financial period starting from January 1 2019 in which an ESR Notification is filed. The reportable period of a business is always the accounting period preceding an accounting period in which an ESR Notification is required for submission.
- Relevant activities – provide details related to income on leasing/financing in UAE, whether or not the business has carried out leasing/financing economic activities within a reportable period, regulatory authority, etc.
- Ownership information – if applicable, name of the parent company, tax identification number, parent company’s registered office address, tax residence country, ultimate beneficial owner (UBO) of a licensee owning directly/indirectly at least twenty-five percent of licensee’s ownership interests or share capital, UBO type, etc.
- Declaration – designated contact person details and a guarantee all information submitted are correct
Read More: Frequently Asked Questions about ESR in UAE
Economic substance report filing in UAE
Economic substance report filing in UAE has to be undertaken by corporate entities or partnerships that aren’t considered Exempted Licensees and derive income from leasing or financing activities within a reportable period.
Economic substance report filing in Dubai/UAE has to be done twelve months from the financial year end of a licensee. Non-compliance with the requirement to accomplish economic substance report filing in UAE will result in an administrative fine of AED 50,000. Providing false or incorrect information in an economic substance report will also have an AED 50,000 penalty.
To complete the economic substance report, the following details are to be furnished:
- Financial information – availability of audited financial statements (financial statements must be audited by an external or independent auditor), the currency used for the financial information that was attached in an economic substance report submitted, licensee’s total revenue for a reportable period (total revenue must be income received from the normal business operations and as stated on the income statement), accounting loss or profit of the licensee within a reportable period, net book value for tangible assets that are held in UAE by the end of a particular reportable period
- Branch details – licensees that have branches across the country which carry out leasing and financing activities must report economic activities in one consolidated notification
- Reportable period – the reportable period of a licensee is a financial period starting from January 1 2019 in which an ESR Notification is filed. The reportable period of a business is always the accounting period preceding an accounting period in which an ESR Notification is required for submission.
- Relevant activities information – details on activities that are carried out by a licensee during a reportable period, the regulatory authority responsible for verifying and reviewing the information of a licensee related to leasing and financing
- Details of the licensee – licensee name, the registration number that’s stated on a business’ commercial or trade license, whether or not the licensee has a dual license, licensing authority, the main or primary regulatory authority which issued the primary trade license of the business, place of establishment, registered office address, legal form, etc.
- Information on VAT registration – should include the tax registration number of the licensee and other VAT-related details
Reference:
https://www.mof.gov.ae/en/StrategicPartnerships/pages/esr.aspx
Bola Olaoye is a Legal Senior Associate and holds an LLB from Adekunle Ajasin University as well as a Bar Certificate from the Council of Legal Education. With experience spanning 14 years, she knows the ins and outs of UAE’s laws and practices and has helped provide clear and concise guidance to clients on the appropriate law-abiding measures to be taken concerning Economic Substance Regulations (ESR).
