The UAE has introduced the Economic Substance Regulations (ESR) in line with the global standards set by OECD to curb harmful tax practices. As per the ESR, the mainland, offshore and free zone companies in the UAE are required to have demonstrable relevant activities in the UAE. The companies are required to:
1. Notify the regulatory authorities whether they are carrying out the substantial economic activity in the UAE
2. Undergo Economic Substance Reporting in the UAE
3. Submit Economic Substance Report to the Regulatory Authorities Annually
The Ministry of Economy and several Free Zone Authorities across the UAE have announced the deadline for the filing of Economic Substance Notification for the companies operating on the mainland and in their free zones. The deadlines are fast approaching and the companies need to assess their relevant activities and submit the notification with the regulatory authority without fail. Missing the deadline means fines await the companies and therefore the companies need to consult reputed Economic Substance Regulation services in Dubai to avoid the penalties.
Also read: ESR Compliance: 5 Requirements for the UAE Economic Substance Test
Economic Substance Regulations (ESR) Notification in the UAE
The companies that conduct the relevant activities in the UAE are mandated to notify the regulatory authorities whether or not they are conducting the relevant economic activities within the UAE. The respective free zone authorities are the regulatory authority for the free zone companies while the Ministry of Economy (MoE) is the regulatory authority for the mainland companies in the UAE. The following are deadlines for the Economic Substance Regulation notification in the UAE.
Deadlines to File ESR Notification for Free Zone & Mainland Companies in the UAE
The UAE government has appointed the free zone authorities to regulate and administer the Economic Substance Notification requirements of the free zone companies in the UAE.
The following are the list of free zone ESR regulatory authorities and the deadline for the annual ESR notification:
| Jurisdiction | Relevant Authority | ESR Notification Deadline |
| Dubai Airport Free Zone (DAFZA) | Dubai Airport Free Zone Authority | 31-May-20 |
| Dubai Silicon Oasis (DSO) | Dubai Silicon Oasis Authority | Deadline Extended till Further Notice |
| Dubai Multi Commodities Center (DMCC) | Dubai Multi Commodities Center Authority | 30-Jun-20 |
| Dubai International Financial Centre (DIFC) | Dubai International Financial Centre | 30-Jun-20 |
| Dubai World Trade Centre (DWTC) | Dubai World Trade Centre Authority | 30-Jun-20 |
| Dubai Aviation City Corporation (DACC) | Dubai South | 07-Jun-20 |
| Ras Al Khaimah International Corporation Centre (RAK ICC) | Ras Al Khaimah International Corporation Centre Authority | 30-Jun-20 |
| Ras Al Khaimah Economic Zone (RAKEZ) | Ras Al Khaimah Economic Zone Authority | 30-Jun-20 |
| Abu Dhabi Global Market (ADGM) | Abu Dhabi Global Market Authority | 30-Jun-20 |
| Ajman Free Zone (AFZ) | Ajman Free Zone Authority | 30-Jun-20 |
| Sharjah Airport International Free Zone (Saif Zone) | Sharjah Airport International Free Zone Authority | 30-Jun-20 |
| Hamriyah Free Zone (HFZ) | Hamriyah Free Zone Authority | 30-Jun-20 |
| Sharjah Media City (Shams) | Sharjah Media City Free Zone | 30-Jun-20 |
| Fujairah Free Zone (FFZ) | Fujairah Free Zone Authority | 15-Jun-20 |
| International Free Zone Authority (IFZA) | International Free Zone Authority | 30-Jun-20 |
| Creative City Fujairah (CCF) | Creative City Fujairah Free Zone | 31-Jul-20 |
| Umm Al Quwain Free Trade Zone (UAQ FTZ) | UAQ Free Trade Zone Authority | 30-Jun-20 |
| LLCs & other Mainland Companies | UAE Ministry of Economy | 30-Jun-20 |
What are the Penalties for Non-Compliance of ESR Notification Filing?
Every company in the UAE needs to file the Economic Substance notification with the regulatory authority to inform whether or not they are carrying out the substantial economic activity within the UAE. This is a mandatory requirement and failing to ensure the filing or filing inaccurate information will attract hefty penalties. The penalties for both the mistakes will lead to penalties in the range of AED 20, 000 – AED50, 000.
What Are the Relevant Activities for UAE Economic Substance Reporting?
UAE Economic Substance reporting regulations apply to the businesses that carry out the following relevant activities.
- Banking Business
- Insurance Business
- Investment Fund management Business
- Lease – Finance Business
- Headquarters Business
- Shipping Business
- Holding Company Business
- Intellectual property Business (“IP”)
- Distribution and Service Centre Business
What MNCs Should do to Ensure Economic Substance Regulations Compliance in the UAE?
The MNCs operating in the UAE need to assess the impact of the regulations if they fall under the scope of the Economic Substance Regulations in the UAE. The companies need to enhance the level of economic substance to ensure compliance with the regulations.
Why Choose Jitendra Chartered Accountants for Ensuring ESR Compliance in the UAE?
The mainland, free zone and offshore companies in the UAE are required to submit the Economic Substance Notification to the regulatory authorities without fail before the prescribed deadline. The ESR is a new regulation in the UAE and the companies are under pressure on how to assess whether or not they are conducting the relevant economic activities in the UAE. This is where the expert assistance of Jitendra Chartered Accountants (JCA) comes in handy to the companies.
JCA offers the following services to the companies to ensure they are complying with the Economic Substance Regulations in the UAE.
- Assistance in assessing whether the companies come under the scope of the Economic Substance Regulations in the UAE
- Help with the proper and timely filing of the Economic Substance notification with the Regulatory Authority
- Provide Recommendations on the Economic Substance Test if the Company fail to satisfy the same