Mark 30 June 2022 as your deadline for filing the Economic Substance Regulations (ESR) notification in the United Arab Emirates (UAE) for 31 December 2021. The Ministry in the UAE passed a Cabinet Resolution no. 31/2019, effective from 30 April 2019, requiring all businesses to comply irrespective of the related activity they undertake.
The initial directive was in implementation from the fiscal year 2019 until its revocation by the passing of the new ESR on the 10 August 2020 vide cabinet resolution 57.2020. The latest update of the ERS guideline was on 19 August 2020 by Ministerial Decision No. (100).
What is an ESR Notification in the UAE?
There are nine relevant activities in which business entities can involve themselves in the UAE. All entities with a license to do business in the UAE must carry out one or more of the nine relevant activities and report their working or non-working status to the regulatory authorities.
In compliance, the UAE free zone companies must report the same by filing an ESR notification and submitting it to the free zone authorities. The Ministry of Economy directs mainland companies to file and submit their ESR notification concerning their relevant activities.
Penalties for Non-Compliance with ESR
It is a mandatory filing and submission to which no licensed business in the UAE must fail to comply. Non-compliant traders will incur penalties as follows.
| Failure | Fines In AED |
| Non- Submission of the Notification | 20,000 |
| Non-Submission of Report | 50,000 |
| Incomplete or Inaccurate Information | 50,000 |
| Inability to showcase adequate economic substance (1st Failure) | 50,000 |
| Inability to showcase good economic substance (2nd consecutive Failure) | 400,000 |
The Federal Tax Authority (FTA) in the UAE has taken the necessary steps to curb ESR non-compliance by conducting internal audits and imposing non-financial penalties such as exchanging information with selected foreign authorities.
Upcoming Deadlines for ESR Submissions
The upcoming deadlines for ESR submissions for legal businesses in UAE are listed below.
| Economic Substance Submission And Report Filing Deadlines | ||
| Financial Year End | Notification Filing Deadline | ES Report Filing Deadline |
| 31 December 2020 | 30 June 2021 | 31 December 2021 |
| 31 January 2021 | 31 July 2021 | 31 January 2022 |
| 28 February 2021 | 31 August 2021 | 28 February 2022 |
| 31 March 2021 | 30 September 2021 | 31 March 2022 |
| 30 April 2021 | 31 October 2021 | 30 April 2022 |
| 31 May 2021 | 30 November 2021 | 31 May 2022 |
| 30 June 2021 | 31 December 2021 | 30 June 2022 |
| 31 July 2021 | 31 January 2022 | 31 July 2022 |
| 31 August 2021 | 28 February 2022 | 31 August 2022 |
| 30 September 2021 | 31 March 2022 | 30 September 2022 |
| 31 October 2021 | 30 April 2022 | 31 October 2022 |
| 30 November 2021 | 31 May 2022 | 30 November 2022 |
| 31 December 2021 | 30 June 2022 | 31 December 2022 |
Conclusion
As stated in the post, non-compliant businesses are heavily penalized, so it is advisable to work on the necessary documentation well in advance for the applicable fiscal year.
Legal entities must file and submit their ESR notification within six months from the end of the appropriate fiscal year and report the relevant activities within twelve months.
The above guideline holds good for all traders in UAE unless they have an exemption for the same or the income was from another financial year.
Flyingcolourtax can help you with the complex documentation to ensure that you file and submit your ESR notification within the deadline.
Book your free consultation with us to know more about the comprehensive services.
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Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.