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Economic Substance Regulations in UAE | KBAME | ESR Notification
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Economic Substance Regulations in UAE June 22, 2020(https://www.kbame.com/2020/06/22/)
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What is ESR / Economic Substance Regulations in UAE? (https://www.kbame.com/economicsubstance-regulations-in-uae/) On 30 April 2019 UAE introduced a Resolution on the Economic Substance (https://www.kbame.com/economic-substance-regulations-in-uae/) and these regulations are applicable for all private sector companies. This regulation lists out the minimum financial criteria’s and tax framework that the licensed entities operating in UAE shall follow. This resolution was introduced as part of the membership requirements of OECD and its related taxation and auditing Framework.
Economic Substance Regulations & Business in UAE (https://www.kbame.com/economic-substancehttps://www.kbame.com/economic-substance-regulations-in-uae/
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Economic Substance Regulations in UAE | KBAME | ESR Notification
regulations-in-uae/) All private sector companies in UAE including onshore and free zone companies comes under this regulation. The companies that have outsourced activities and if the activities are carried out in UAE, then these companies also are require to comply with the ESR.
CIGAs applicable The Core Income Generating Activities (CIGAs) that should be filing the declaration are as given below : Banking Business
Insurance Business
Investment Fund management Business
Lease – Finance Business
Headquarters Business
Shipping Business
Holding Company Business
Intellectual property Business
Distribution and Service Centre Business
Submissions / Filing All licensed entities that are governed by the regulations will need to file a notification for submission of their economic substance (https://www.kbame.com/economic-substance-regulations-in-uae/) declaration to their Regulatory Authority and file the economic substance (https://www.kbame.com/economic-substance-regulations-in-uae/) declaration within 12 months from the end of their financial year.
Regulatory Authorities The following are the regulatory authorities included under Cabinet Decision No (58) of 2019 issued on 4 September 2019 :Ministry of Economy (MOE), Abu Dhabi Global Market (ADGM), Abu Dhabi Media Zone Authority (ADMZA), Dubai Airport Free Zone (DAFZA), Dubai Development Authority (DDA), Dubai International Financial Centre (DIFC), Dubai Multi Commodities Centre (DMCC), Dubai Aviation City Corporation (DCAA), Dubai Healthcare City (DHC), Dubai World Trade Centre (DWTC), Fujairah Free Zone, KIZAD, Ajman Free Zone, Hamriyah Free Zone Authority, , RAK Economic Zone, RAK ICC, Sharjah Airport International Free zone (SAIF ZONE), Umm Al Quwain Free Trade Zone, International Free Zone Authorities.
Economic Substance Regulations in UAE Due Dates / Deadlines (htt // kb / i b t l ti i https://www.kbame.com/economic-substance-regulations-in-uae/
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Economic Substance Regulations in UAE | KBAME | ESR Notification
(https://www.kbame.com/economic-substance-regulations-inuae/) Filing of the detail f shall apply to financial years commencing on or from 1 January 2019 that will be ending on 31st December 2019 or starting from 1st April 2019 and ending by 31st March 2020. Due date on the filing are generally before the end of the first quarter of next financial year and shall be listed in the Ministry of Finance website (https://www.tax.gov.ae/).
Economic Substance Regulations Penalties in UAE Noncompliance to the Regulations or failure to file the declaration shall result in penalties, potential suspension, revocation, or non-renewal of its registration and sharing of related information to foreign bodies.
Exemptions If a company or an entity have not earned any income in its financial period from the above listed relevant activities, then they are exempted from the requirement to meet the economic substance (https://www.kbame.com/economic-substance-regulations-in-uae/) test and file an economic substance (https://www.kbame.com/economic-substance-regulations-in-uae/) declaration for that financial period. All entities that are licensed directly or indirectly under a Federal or an Emirate Government, or a UAE Government body or authority with at least 51% ownership by these are exempt from the ESR Regulations (https://www.kbame.com/economic-substance-regulations-in-uae/).
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