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ESR Filing in the UAE : An Overview

The ESR introduced a legal requirement for all UAE-based entities to locally maintain ‘economic substance’ in line with the level and type of activity they undertake. The ESR applies from 30 April 2019.

The ESR is applicable to all natural and/or juridical persons licensed by the competent authority in the UAE, to carry out a “relevant activity” in the UAE, including free zone and a financial free zone.

The following activities would be considered as relevant activities:

  • Banking
  • Insurance
  • Investment fund management
  • Lease-finance
  • Headquarters
  • Shipping
  • Holding company
  • Intellectual property
  • Distribution and service centre

Once a UAE licensee company has been identified as undertaking relevant activities, the ESR requires the company to satisfy the economic substance test which comprises three elements:

  1. It is directed and managed in the UAE in relation to that activity
  2. It conducts Core Income-Generating Activities (CIGA) in the UAE
  3. It meets the adequate requirements with regard to the level of relevant activity carried on in the UAE i.e. there are an adequate number of employees in relation to that activity who are physically present in the UAE, there is adequate expenditure incurred in the UAE and there are adequate physical assets in the UAE

There are also regulatory filing requirements that need to be met in order to comply with the ESR.

There are potentially two broad filing requirements under the Regulations: (i) Notification form and (ii) Annual substance return. Under the ESR, all filing requirements fall under the remit of the relevant Regulatory Authority, and as such it is the Regulatory Authorities that set the requirements, deadlines and format for notification filing as they believe is appropriate and which may vary. Below, we have summarised the most up to date filing requirements as released by some of the Regulatory Authorities

  • ESR Notification deadlines
Ajman Free Zone (AFZ)
  • Notification Deadline: The notification deadline for Licensees registered at AFZ is 30 June 2020.
  • Guidance for Filing: Available
Abu Dhabi Global Market (ADGM)
  • Notification Deadline: The new notification deadline for Licensees registered in ADGM is 30 June 2020.
  • Guidance for Filing: Available
Dubai Airport Freezone Authority (DAFZA)
  • Notification Deadline: The notification deadline for Licensees registered at DAFZA has been extended until 31 May 2020. (previously 3 May 2020)
  • Guidance for Filing: Available
Dubai International Financial Centre (DIFC)
  • Notification Deadline: The notification deadline for Licensees registered in DIFC is 12 June 2020. The substance notification is expected to be released by 1 May 2020.
  • Guidance for Filing: Available on the DIFC website.
Dubai Multi Commodities Centre (DMCC)
  • Notification Deadline: The notification deadline for all Licensees registered at DMCC is 30 June 2020.
  • Guidance for Filing: Guidance on the filing process is expected during April 2020
Dubai Securities and Commodities Authority (SCA)
  • Notification Deadline: The notification deadline for Licensees registered at in SCA be 31 March 2020.
Dubai Silicon Oasis Authority (DSO)
  • Notification Deadline: The notification deadline for Licensees registered at DSO was 31 March 2020. Guidance on the filing process is available.
  • Guidance for Filing: Available
Hamriyah Free Zone Authority (HFZA)
  • Notification Deadline: The notification deadline for Licensees registered in HFZA was 30 June 2020
Ras Al Khaimah International Corporate Centre (RAKICC)
  • Notification Deadline: The notification deadline for Licensees registered at RAKICC will be 30 June 2020.
  • Guidance for Filing: Available
Sharjah Airport International Free Zone (SAIF Zone)
  • Notification Deadline: The notification deadline for Licensees registered at in SAIF Zone will be 30 June 2020.
Dubai World Trade Centre
  • Notification Deadline: The notification deadline for Licensees registered at in DWC be 30 June 2020.
Dubai Aviation City Corporation
  • Notification Deadline: The notification deadline for Licensees registered at in DACC be 7 June 2020.
Other Regulatory Authorities (e.g. Jebel Ali Free Zone, etc.)
  • Notification Deadline: Other regulatory authorities are yet to declare their notification deadline. However, in line with above regulatory authorities it would be prudent to assume that the deadline for other regulatory authorities shall be no later than 30 June 2020.7

We expect the authorities to clarify this and other points as and when they release notification forms.

Immediate actions

To avoid non-compliance with these rules and potential penalties, as a first and immediate step all UAE entities (both companies and branches) should assess whether they fall under the UAE Economic Substance rules (in 2019) and which of the below compliance obligations they may have (if any):

  1. Notification filing
  2. Having sufficient substance in the UAE and how to demonstrate this
  3. Filing of an annual substance return

If the entity does fall under these rules and has to demonstrate sufficient substance in the UAE, it should also make an assessment as to whether it can satisfy the economic substance tests prescribed by the regulations.

How we can help

If you haven’t yet considered the impact of the UAE Economic Substance Regulations on your company/ branch in the UAE and require any of the below:

  • Assessment on whether you fall within the rules
  • Assessment on whether you can satisfy the Economic Substance test
  • Notification filing assistance

Our experienced team will be happy to analyse your business activities, determine whether you are within the rules and guide you as to what actions are required to ensure full compliance.

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