What are economic substance regulations?
The Economic Substance Regulations, or ESR, was issued by the UAE and is aimed at curtailing harmful tax practices and closely tracks the global standard set by the OECD (Organisation for Economic Co-operation and Development).
As the UAE is a member of the OECD framework, in response to an assessment of the UAE’s tax framework by the European Union (EU) Code of Conduct Group on Business Taxation, the UAE introduced a resolution on Economic Substance on April 30, 2019.
What firms fall under the scope of UAE ESR norms?
The regulations simply require UAE companies and other UAE business forms that carry out the below-listed activities to prove that they maintain adequate economic substance in the UAE relative to the activities they undertake.
All UAE onshore, offshore and free zone companies like banking and insurance firms, investment fund managers, financing and leasing firms, shipping, distribution and service centers, intellectual property firms, holding companies or the top of a corporation taking full responsibility for managing all business activities.
What you need to get done immediately?
What needs to be done immediately is some formalities namely, ESR Impact Assessment, ESR Gap Analysis, ESR Implementation and ESR Compliances (Compilation and submission of ESR Notification Forms and ESR Returns to the relevant regulating authorities) for your respective companies. To do this you need to get in touch with tax advisory firms!
The reason why you need to get on this head-on without any further delay, is to avoid being levied with significant fines and penalties and other serious consequences, in the event of non-compliances with ESR requirements.
Sources – Gulf News (https://tinyurl.com/UAEESR)
