Understanding the ESR Reporting Requirements in the UAE
The Economic Substance Regulations is implemented in the United Arab Emirate (UAE) to ensure that companies conducting relevant activities have a genuine and substantial presence in the country. To demonstrate compliance with the Economic Substance Regulations, businesses in the UAE are required to prepare and submit a formal document, an Economic Substance Report, to the National Assessing Authority for each financial year in which they engage in relevant activities. At the end of a financial year, Licensees have 12 months from the end of that financial year to prepare and submit the Economic Substance Report. This document serves as an integral part of the UAE’s commitment to international transparency while contributing to its economic growth and stability.
ESR Reporting Requirements
Following are the ESR reporting requirements:
1. General Information
The first section of the Economic Substance Report requires the entity to provide the following information:
– Licensee Details: Licensee’s name, license number, and licensing authority.
– Office Information: place of establishment, office location, address, legal forms, and premises.
– VAT Registration: Whether the Licensee is registered for Value Added Tax (VAT) in the UAE.
– Multinational Group: Whether the Licensee is part of any multinational group.
– Government Ownership: Whether the Licensee is wholly owned by the UAE government.
2. Branch Details
The next section requires the Licensee to report that whether the business has branches other than the main office. If so, the Licensee must provide the information for each branch, which includes:
– License Number
– Licensing Authority
3. Reportable Period
In the context of the Economic Substance Regulations in the UAE, reportable period refers to the financial year for which a company must provide detailed information to the National Assessing Authority. It’s important to note that reportable period is always the financial year that is completed and not the current one. In this section the Licensee is required to specify the start and end dates of the reportable period.
4. Updated Information
Next, the Licensee is required to mention whether the answers to the previous questions differ from the Economic Substance Notification submitted for the reportable period. If there is difference, the Licensee is required to provide a reason in the Economic Substance Report.
5. Financial Information
This section requires the Licensee to report whether audited financial statements for the reportable period are available. Additionally, entity needs to answer whether AED or USD is the currency in the financial statements provided for the Economic Substance Report. Accurate and transparent financial information is a cornerstone of the Economic Substance Regulations; therefore, ESR reporting requires following information:
– Total Revenue for the reportable period
– Accounting Profits or Losses for the reportable period
– Net Value of UAE Assets at the end of reportable period
6. Relevant Activities
The Economic Substance Report requires the Licensee to clearly outline one or more relevant activities, along with the details of the relevant authorities, which they executed during the reportable period. This enables the National Assessing Authority to verify that companies are genuinely contributing to the local economy. If a Licensee selects Intellectual Property (IP) business, Licensee must declare whether they fall under the category of a High-Risk IP Licensee. Moreover, they should indicate whether the provided information differs from the ESR notification previously submitted. The Licensee should also report whether an outsource service provider was used in relation to the relevant activities. Different relevant activities may have different ESR Reporting requirements, such as information about the relevant income, expenses, assets, the core income-generating activity and more for the reportable period.
7. Ownership Information
The Licensee should provide following details about the entities that they work with:
– Parent Company: If the Licensee worked with parent company, they must report its name, tax identification number, address, and tax residence country.
– Ultimate Parent Company: Similar information should be provided for the ultimate parent company.
– Ultimate Beneficial Owner: If the Licensee worked with ultimate beneficial owner, they must report whether the entity directly or indirectly owns their 25% or more of a share. However, the other reporting requirements remain same.
– Outsourcing Information: If the Licensee worked with outsourcing providers, they should report the number of outsourcing providers, name, address, VAT tax registration number and other information about the outsourcing providers.
8. Business Management in the UAE:
The Licensee is required to explain how their business was managed by providing details about board meetings held inside or outside the UAE, decisions made during these meetings, and minutes of the meetings. However this section is not relevant, if the Licensee carries out Holding Company Business.
9. Declarations:
The Licensee must provide information about designated contact person and declare that they have adequate physical assets, expenditure, and qualified employees. In order to comply with Economic Substance Regulations, the Licensee should declare that they are directed and managed in the UAE. They can also attach additional documents, including mandatory financial statements. Finally, they have to confirm that all the information provided in Economic Substance Report is accurate and acknowledge that they may face penalties for non-compliance with the Economic Substance Regulations.
10. Preview and Summary:
Before submission, Licensee is required to review their Economic Substance Report for accuracy and completeness.
Did this article help you? If so, please tell me in a comment what do you think about it.
Don’t miss any of our future video tutorials, follow us on Youtube. Like us on Facebook. Join our Best Deals Telegram Channel. Join our Android TV Box Firmware Updates Telegram Channel. Subscribe now to our newsletter. If you need Tech Reviewer or Youtube Influencer read this. Donate now here to support CGR Team!
