Economic Substance Regulations (ESR)

Posted By: FinXcel a year ago

The objective of the ESR is to set out the criteria and determine the requirements that confirms that the entities which are carrying on an activity in the UAE has an economic substance.

“Relevant Activities” under the scope of the Regulations are below businesses :

  • Banking
  • Insurance
  • Investment Fund management
  • Lease finance
  • Headquaters
  • Shipping
  • Holding company
  • Intellectual property (IP)
  • Distribution and service center

Requirements to meet Economic Substance Test

Below criteria is set in order to meet the Economic Substance Test relating to any Relevant Activity carrying on by an entity :

  • CIGA are carried out in the UAE.
  • Relevant Activity (RA) is managed and directed in the UAE.
  • Giving regard to the size and nature of RA, it should be noted that there is an adequate:
    1. Number of qualified full-time employees to carry out that RA who are physically present in the UAE, irrespective of term of contracts or whether employed by that entity.
    2. Operating expenditure incurred in the UAE by an entity.
    3. Physical assets in the UAE.

Requirement provide information

Notification Form

Each entity and exempted entity shall, within 6 months from the entity’s financial year, submit a Notification Form through the Ministry of Finance ESR Portal that contains the prescribed information.

Economic Substance Report

An entity that is required to meet the Economic Substance Test shall within 12 months from the end of the financial year, submit an Economic Substance Report through Ministry of Finance ESR Portal that that contains the prescribed information.

An entity is not required to meet the Economic Substance Test in a financial year in which it does not derive any Relevant Income.

How we standout as an Expert ESR Consultant

We have a strong grip on ESR Regulations and plenty of experience in filing ESR Notification Forms and Reports for wide variety of businesses.

Our Experts guide clients to make them understand how they can ensure compliance with ESR Regulations, to carry out safely their core revenue generating activities with in UAE.

We formulate our ESR Reports in a manner that clearly demonstrate the criteria meeting of Economic Substance Test.

We ensure compliance with the ESR Regulations by filing Notification Form and Economic Substance Report within the timeline stipulated in the Regulations.

Our recommendations to meet Economic Substance Test are based on Economic Substance Regulation, that includes our gap-analysis of existing circumstances of an entity vis-à-vis actions required to be in compliance with the ESR regulations.

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