Economic Substance Regulations Filing Services
Looking for a professional ESR filing company in Dubai to assist with ESR notification and ESR reporting? Avyanco, with its pool of ESR experts, helps you with benchmarking and planning to ensure your business’s economic substance.
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ESR Filing in UAE
New economic substance regulations for UAE companies were enforced by Cabinet of Minister Resolution No. (31) in April 2019. ESR was introduced as a guideline to improve the tax framework and to make companies accountable in terms of maintaining their economic presence in the UAE.
Complying with ESR requirements can be challenging for certain businesses, especially ones without in-house teams and required knowledge. Non-compliance with ESR may result in penalties, such as suspension of your UAE license or a fine of AED 20,000 to AED 400,000.
At Avyanco, we provide ESR compliance services to help you avoid such penalties and maintain your reputation.
Economic Substance Regulations UAE - Why were they introduced?
The reason for introducing economic substance regulations in Dubai was to ensure that businesses, especially multinational organizations, are not shifting profits to the UAE in order to save tax without conducting substantial activities here. These corporations only register a business in Dubai to take advantage of tax laws without contributing anything to the country’s economic growth.
Here are some of the primary reasons why electronic substance regulations are required in the UAE –
Comply with Global Anti-Money Laundering Regulations
ESR helps Dubai counter money laundering by aligning itself with global efforts. ESR in Dubai enables transparency and accountability to eliminate such illegal activities.
Curtail Harmful Tax Practices
Electronic substance regulations eliminate practices that companies have used in the past to artificially reduce their tax liabilities. Now, all eligible Onshore Free Zone companies must demonstrate economic presence in Dubai, promoting fair tax competition.
Eliminate shell on-paper companies
ESR in UAE eliminates the incorporation of shell companies where no economic activities take place. If you fail the ESR assessment, there will be penalties, and your license may get revoked.
Supervise Relevant Activities
ESR also enables supervision and regulation of activities that have an impact on the UAE’s economy and international obligations. Companies registered/formed in the UAE (including free zones) that carry out the specific activities must do ESR report submission in UAE.
Relevant Activities List
- Insurance & Banking Business
- Lease Finance Business
- Shipping Business
- Distribution and Services
- Investment Fund Management Business
- Holding Company
- Company Headquarter
- Intellectual Property Rights
Step by Step guide to ESR return submission in UAE
Businesses subjected to ESR must fill and submit their ESR notification form each year to the respective regulatory authority. Businesses are also required to finish and submit their ESR reports to the same authority within a year after their financial year ends. If a business hasn’t made money from Relevant Activities or qualifies for exemptions, it doesn’t have to do the Economic Substance Test or file a report. But they still must send a notification form.
If you don’t follow these rules, you could face:
- ESR penalties
- Sharing information with foreign authorities
- Other punishments like your trade license getting suspended or canceled
First Step
Eligibility Assessment
We help you find out if your business operations fall into the category of any Relevant Activities or if you can avail of an exemption. Only businesses conducting a Relevant Activity must file an ESR notification within six months from the end of the applicable financial activity period.
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Second Step
Test Assessment
In the next step, we ensure that you meet the criteria required to pass the economic substance test. Avyanco, being one of the top ESR filing companies in the UAE, also offers guidance on documentation to support future inquiries from authorities.
Last Step
Filing
In the final step of ESR submission, we help you file the ESR notification with the relevant authority. You have to maintain annual substance return poofs even after filing the notification.
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ESR Penalties in UAE
The penalties for failing to submit the ESR notification & report within the government’s deadline are quite steep. They are as follows
- If you do not submit ESR Notification collectively with the necessary documents within the deadline, you will be issued a penalty of AED 20,000.
- If you do not submit an Economic Substance Report within the period mentioned above, you will be issued a penalty of AED 50,000.
Exceptions to ESR regulations in UAE
There are some exceptions to ESR regulations in the UAE. Entities that are exempted from filing ESR include –
- Entities solely owned by UAE residents that are not part of a multinational group and conduct economic activities in the UAE
- Licensee/s or tax resident outside the UAE
- Investment funds
- Foreign companies’ branches that are subject to tax outside the UAE
Why Choose Avyanco for ESR Assessment & Return Filing in Dubai?
Avyanco is your one-stop destination for all your ESR assessment and return filing requirements. We help you figure out your eligibility, file an ESR notification, and submit an ESR report. We also help you with ESR tests and maintaining the required documentation.
- On time ESR notification file
- PR experts, lawyers, and tax consultants
- Offer expert advice on ESR Notification Filing
Still Confused about taking your decision?
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Expertise
Our ESR return submission team and filing experts are always available to lend a helping hand or advice regarding all your questions on Economic Substance Regulations in UAE.
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Ease
We can help ensure that your organization complies with all ESR requirements and avoids ESR penalties.
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Clarity
We ensure that your ESR notification file is filed before the due date, or you will incur steep ESR penalties.
Meet Our Specialists
As the best ESR consultancy in Dubai, we have a pool of ESR experts to help you through each step of ESR notification and report submission. Our ESR experts understand the eligibility and requirements to pass ESR tests. Let’s meet them –
Ravi
Mansur
Himanshu
Himanshu
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ESR in the UAE is a regulation introduced by the government that requires businesses to demonstrate economic substance in the country where they operate. If a business is involved in a ‘defined’ business activity under the ESR scope, it must maintain an economic presence in the UAE. ESR ensures that businesses are not just using the UAE to escape taxes.
To file your ESR notification, you must follow a step-by-step process. You must first assess your eligibility. The next steps include preparing the required documents and submitting the application via an online portal. An ESR consultancy firm like Avyanco can help you through each step, making the entire process seamless for you.
Businesses conducting Relevant Activities must file ESR notification in the UAE. These Relevant Activities are – insurance business, banking business, lease finance business, shipping business, distribution and services, center business, investment fund management business, holding company, company headquarter, and IP rights. However, businesses falling into specific categories enjoy exemption from filing ESR notifications.
Yes, ESR filing is mandatory for businesses conducting Relevant Activities in the UAE unless they are exempted from doing so.
If you fail to comply with ESR regulations, you may face consequences.
- Failure to submit ESR notification with necessary documents within the deadline could result in an ESR penalty of AED 20,000
- Failure to file an Economic Substance Report within the specified period will attract a penalty of AED 50,000
- Your information might be shared with the foreign Competent Authority as described in Article 1 of the Regulations
- You might face other administrative sanctions, such as having your business license suspended, revoked, or not getting renewed