You may be aware that UAE Economic Substance Requirements (‘ESR’) compliance is required to be made on an annual basis for the covered entities carrying out prescribed activity(ies). Recently, we have seen notices/ e-mails from relevant authorities monitoring and following up with companies within their jurisdiction to comply with the ESR reporting requirements. One such e-mail is attached herewith on a sample basis, for your reference.
In many cases, we have also seen relevant authorities levying penalties for inadvertent delay/ omission by taxpayers in making ESR compliances.
Therefore, it is important to review the financial statements and transactions of the entities set up in the UAE (including branches of foreign companies), evaluate for ESR compliance and make such compliances, if applicable.
The ESR Notification and Report is to be required to be submitted every year within the prescribed due dates as under:
- ESR Notification: within six months from the end of the accounting year
- ESR Report: within twelve months from the end of the accounting year
If your Company follows January to December as its financial year, the due date for compliance with ESR regulations for FYE 31 December 2022 would be as under:
- ESR Notification: to be submitted on or before 30 June 2023
- ESR Report: to be submitted on or before 31 December 2023
Non-compliance with the above-mentioned requirements shall result in the levy of penalties as under**:
| Type of offence/ violations | Administrative penalty |
| Failure to submit the ESR Notification (or any relevant information or documentation) | AED 20,000 |
| Failure to submit the ESR Report and any relevant information or documentation required to be submitted
OR Failure to meet the Economic Substance Test for each year |
AED 50,000
(AED 4,00,000 for a repeat offence/ violation in FY immediately following the FY in which the first offence/ violation was committed) |
| Wilfully furnishing of inaccurate information | AED 50,000 |
**Additional consequences such as suspension, revocation or non-renewal of the business license may also apply
Please note that the due date for filing the ESR notification i.e. 30 June 2023 is approaching. We will be glad to assist you with the filing of the ESR Notification and Report for FYE 31 December 2022, if required.
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