ESR

To summarize, UAE is a no or low tax jurisdiction, which companies can sometimes use to their advantage in order to minimize paying taxes. This law has come into place in order to tackle tax evasion by shifting of income from a higher tax jurisdiction to a lower tax jurisdiction. So companies conducting certain activities need to prove that they have enough substance/presence within UAE.

Assess whether you conduct a relevant activity and earn income from it. Then, if required (according to each jurisdiction), first submit an Economic Substance Notification, followed by Economic Substance Return.

Information available on the Notification Deadline doc shared. Know the emailer being sent out, the jurisdiction, the deadline, who needs to submit, All or only people conducting relevant activity.

The process needs to be repeated each year.

Information is available in the ‘Notification Deadline’ file for each jurisdiction.

Substance over form approach is to be used, not just what activity is stated on the license. The summary of the relevant activity shared, does the client conduct any of those activities?

Companies whose financial year started on or after 1st Jan 2019 and ended on or before 31 Dec 2019 need to submit the notification.

A company must submit its ESR in the following year, even if it was just formed.

In short, certain types of companies must be managed or directed from within the UAE, have adequate UAE-based full-time staff, generate most of their income in the UAE, maintain adequate assets, and demonstrate adequate operating expenditure in the UAE. This is called the Economic Substance Test.

This things are reported through the Economic Substance Return.

The ESR needs to be submitted within 12 months of the financial year-end (Mentioned in MOA/AOI etc).

Substance over form, not only the activity listed on the license, recommend to get assessed.

But even when you do not conduct any relevant activity, you still may require to submit the notification, according to the jurisdiction.

AED 10,000 to 50,000