An amended set of Economic Substance Regulations (‘ESR’) in the United Arab Emirates (‘UAE’) was issued on 10 August 2020 by way of Cabinet Resolution No. 57 of 2020, thereby revoking the original Cabinet Decision No. 31 of 2019. This was followed by the release of Ministerial Decision No. 100 of 2020, dated 19 August 2020 serving as supplementary guidance with an updated Relevant Activities Guide attached as appendix (collectively referred to as ‘New UAE ESR’). The frequently asked questions (‘FAQs’) on the Ministry of Finance (‘MoF’) website have also been updated to factor in the provisions of the New UAE ESR.
Please note that the New UAE ESR is effective from 1 January 2019 and apply to financial years starting on or after 1 January 2019 to all licensees operating within Shams. Accordingly, Shams licensees are required to re-assess their business activities in light of the New UAE ESR.
ES notifications The New UAE ESR mandates licensees to file a notification through the MoF’s dedicated ESR portal (‘MoFPortal’), within six (6) months of the licensee’s financial year end, only if a Relevant Activity has been undertaken during the Reportable Period. The portal is expected to go live in the first week of December 2020. Accordingly, all Shams licensees which undertake relevant activity(ies) will be required to file a notification on the MoF Portal by the following dates (even where they have previously filed such notifications with Shams through email):
Six (6) months from the end of the first reportable period 31st December 2020 if the above period has expired before launch of MoF portal Examples:
1. A licensee has its first reportable period as follows:
Start Date: 1st November 2019
End Date: 31st October 2020
In this specific example, the Shams licensee will be required to file the ES Notification form by 30th April 2021.
2. A licensee has its first reportable period as follows:
Start Date: 1st January 2019
End Date: 31st December 2019
In this specific example, the Shams licensee will be required to file (or re-file, as the case maybe) the ES Notification form by 31st December 2020.
3. A licensee has its first reportable period as follows:
Start Date: 1st April 2019
End Date: 31st March 2020
In this specific example, the Shams licensee will be required to file the ES Notification form by 31st December 2020.
Licensees and/or Exempted Licensees that fail to submit their Notification along with the required supporting documents by 31 December 2020 will be issued a penalty of AED 20,000 under Article 13 of Decision 57 for failure to provide a Notification.
ES reports The ES reports will also need to be uploaded onto the MoF Portal within 12 months, following the end of the licensee’s financial year end or by 31st December 2020, where such period has expired before launch of the portal.
Licensees and/or Exempted Licensees (where applicable) that fail to submit their Economic Substance Report within the aforementioned period shall be subject to a penalty of AED 50,000 under Article 14 of Decision 57 for failure to provide an Economic Substance Report.
While the MoF Portal has not yet been launched, the format of the ESR Notification and Report can be accessed using the following links:
• Economic Substance – Notifications Template
• Economic Substance – Report Template
Please be advised that entities are responsible in ensuring full compliance with the New UAE ESR. For any uncertainty regarding the application of the New UAE ESR, Please contact us