Some free zones have extended the March 31 deadline for companies to file Notification of Economic Substance Regulation with their relevant activities and core income generating activities for businesses managed within and from the UAE.
The leniency for the new deadline to June 30 will ensure timely adherence to regulation and is in line with the Ministry of Finance’s deadline.
“The cutoff date of the notification to the Ministry of Finance is 30 June 2020 and that’s what was communicated to all regulators. To assure the compliance, some regulators decided to cut it short,” said Younis Haji Al Khouri, Undersecretary at the Ministry of Finance.
Dubai International Financial Centre had asked entities to submit an economic substance notification on the DIFC portal. However the March 31, 2020 deadline previously advised is no longer applicable, it said on its website.
As part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by European Union Code of Conduct Group of Business Taxation, the UAE introduces a Resolution on the Economic Substance on April 30, 2019. The regulation required companies that carry out the relevant activities to maintain an adequate economic presence in the country relative to the activities they undertake. It applied to financial year commending on or from January 1, 2019.
RAK International Corporate Centre said entities that are governed by the regulations will need to submit a notification by June 30, 2020. Ras Al Khaimah Economic Zone said the current circulated deadline for licensees to submit their notification templates is June 30, 2020.
Abu Dhabi Global Markets said in a note to its client that the ESR notification was extended until further notice. Companies operating in Ajman Free Zone can also send their report by June 30, 2020.
“This is a big relief to businesses considering current epidemic situation and in general businesses were awaiting further clarification on the ESR with respect to its applicability from MoF,” said Anurag Chaturvedi.
He further noted that every business should take this leniency from the regulators to determine their core income generating activities. Business should analyse and prepare details including the financials by core income generating activities, corporate governance model structuring, employee details, Expenditure details and asset base with respect to each core income generating activities in order to submit correct information to regulators.
“This additional period will enable businesses to understand implication of regulation as it’s based on substance rather license activities. Therefore, a detailed analysis of business activities is important to ascertain which relevant activities are applicable to businesses. Businesses are required to do reporting for each relevant activity,” added Chaturvedi.