Different Types of Accounting Practices in the UAE You can’t afford to disregard the accounting function if you’re an entrepreneur in Dubai running a small
Penalty for Failing File Economic Substance (ESR) Notification Before Deadline
ESR an overview
The UAE has been implementing various regulations, including VAT, AML, to streamline the economy as per global standards and the latest in this series is the UAE Economic Substance Regulations (ESR). As per the ESR, the companies in the UAE are required to demonstrate the economic substance in the relevant activities they carry out within the UAE. The companies need to first notify the regulators whether they carry out the relevant activities as per the ESR or not and then follow it up with the requirements for the UAE economic substance test and file ESR report.
The businesses that are within the scope of the UAE ESR, must prepare themselves to implement strategies for the annual UAE ESR notification and reporting. They must also need to satisfy the requirements for the UAE Economic Substance Test for which professional guidance of reputed ESR services firms in Dubai, UAE can be availed. The companies are still in dark over the requirements for satisfying the Economic Substance Test and this article is a comprehensive guide on the ESR Test Requirements.
ESR reporting obligations
Firstly, UAE based entities need to determine whether or not they performed any of the nine Relevant Activities during the FY 2019. If that is the case, the ESR Notification must be completed and submitted through the online portal provided by the UAE Ministry of Finance (MOF). Secondly, if an entity generated Relevant Income with those activities during the FY 2019, it must subsequently complete and submit the more extensive ESR Report through the mentioned portal. The 31 December 2020 deadline applies for both the ESR Notification and ESR Report. Entities not performing any of the Relevant Activities during the FY 2019 do not need to report under the ESR for that year. Entities (or branches) that can claim any of the specific exemptions under the ESR can do so by means of the ESR Notification.
ESR fines/penalties in the UAE
The mainland, free zone, and offshore companies need to file the economic substance regulations notification before the prescribed due date. Failing to notify the regulatory authorities before the deadline will attract hefty penalties in the range of AED 10,000 to AED 50,000. The companies will incur the same amount of fine for furnishing incorrect information in the notification. To avoid such unforeseen incidents, the companies should consult the best ESR service firms in Dubai, UAE.
How can we help?
Alya Auditors serves businesses in the UAE with their experience in auditing, accounting, and VAT in the UAE. Experts will help them grow their business without having to combat challenges posed by inefficiencies in accounting tasks. We can also help entrepreneurs looking to start their dream business in the UAE. Get end-to-end accounting support coupled with the benefits of new-age technology that they use to boost your accounting tasks.
Apart from the above services we are also helping the companies and businesses in the UAE to file their ESR notification.
Learn more about Alya Auditors and its offerings.