ESR Notification Filing: Are You Ready to File Before 30th June 2022?

May 25, 2022Dated:  | |

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.

FailureFines In AED
Non- Submission of the Notification20,000
Non-Submission of Report50,000
Incomplete or Inaccurate Information50,000
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 EndNotification Filing DeadlineES Report Filing Deadline
31 December 202030 June 202131 December 2021
31 January 202131 July 202131 January 2022
28 February 202131 August 202128 February 2022
31 March 202130 September 202131 March 2022
30 April 202131 October 202130 April 2022
31 May 202130 November 202131 May 2022
30 June 202131 December 202130 June 2022
31 July 202131 January 2022 31 July 2022
31 August 202128 February 202231 August 2022
30 September 202131 March 202230 September 2022
31 October 202130 April 202231 October 2022
30 November 202131 May 202230 November 2022
31 December 202130 June 202231 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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