ESR Advisory in Abu Dhabi
The Economic Substance Regulations (ESR) in the United Arab Emirates (UAE) have been put into place to ensure that companies operating in the UAE are conducting their activities in line with the UAE’s economic substance requirements. To meet these requirements, businesses must appoint an ESR consultant who can provide advice and guidance on how to comply with ESR filing and audit requirements.
At AFS Auditing, we are dedicated to helping businesses in Abu Dhabi understand and comply with the regulations. Our team of experienced professionals offers a range of services, from providing advice on how to meet ESR filing deadlines and preparing reports for submission to carrying out audits and providing ongoing compliance advice.
Why is there a need in UAE to introduce ESR?
The UAE introduced ESR primarily to prevent companies from artificially attracting profits by undertaking certain business activities. After becoming included on the European Commission’s list of non-cooperative jurisdictions, the UAE was required to issue Economic Substance Regulations. These regulations are similar to those recently implemented in jurisdictions such as the Cayman Islands and Jersey.
When is the first reportable financial year?
The Economic Substance Regulation applies to the financial year that begins on or after 1 January 2019. Those entities with a financial year beginning on or after January 1, 2019, through December 31, 2019, would have their first assessable period within those time frames, while those with a financial year beginning on April 1, 2019, through March 31, 2020, would have their first assessable period within those time frames.
Does the ESR application is limited to UAE entities that are part of a foreign multinational group/owned by foreign shareholders?
Distribution businesses, service centers, headquarters, and high-risk IP businesses operating in the United Arab Emirates will be subject to the regulations only if they transact with foreign group entities. Apart from that, business entities that engage in relevant activities will be required to meet economic substance requirements regardless of whether they belong to a foreign multinational group.
Who is exempt from the Regulations?
This regulation does not apply to licensees who are at least 51% owned by the Federal or an Emirate Government, or a UAE Government body or authority.
What are the penalties for non-compliance with Economic Substance Regulation?
A fine of between AED 10,000 and AED 50,000 may be imposed for failure to comply with the ESR (including providing inaccurate or incomplete information). In the following fiscal year, the fine will increase to between AED 50,000 and AED 300,000.
Why Choose Us?
We understand that meeting all the necessary regulations can be daunting, which is why we provide tailored solutions for every business’s specific needs. With our expertise and dedication, you can rest assured that your company will remain compliant with all applicable regulations.
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