TAX

Economic Substance Requirements in the UAE

Economic Substance Notification Filing

Following the introduction of the Economic Substance Regulations (“ESR”) in the United Arab Emirates (“UAE”), all Licensees are required to submit an annual notification to their respective Regulatory Authority (trade license issuing authority).

The notification should be filed in the form approved by the Regulatory Authority and would contain the following information:

  • Confirmation on whether or not the Licensee is carrying on a Relevant Activity
  • If the Licensee is carrying on a Relevant Activity, confirmation on whether or not all or any part of the Licensee’s gross income in relation to the Relevant Activity is subject to tax in a jurisdiction outside the UAE
  • The date of the end of the Licensee’s Financial Year (Accounting Reference Period)

The latest developments with respect to ESR Notification deadlines announced by the respective Regulatory Authorities, including the free zones are outlined below.   

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)[1]

  • 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 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)[2]

  • 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.

 

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.

 

*Deadlines updated 6 May 2020 

Please note it is important to analyse and conduct an impact assessment of business activities in order to determine whether the business falls under the remit of ESR in the UAE.

 

Penalties for Non-Compliance

Failure to comply with the ESR (including providing inaccurate or incomplete information) may result in fine of between AED 10,000 and AED 50,000 in any fiscal year.  The fines increase to between AED 50,000 and AED 300,000 for the subsequent fiscal year. 

   

How GT can assist:

In this regard, the tax team at GT is extending its support to all businesses in conducting:

  • Economic Substance Impact Assessment for UAE entities
  • Assistance in filing Economic Substance notification
  • Assistance in filing Economic Substance Return/ Report

 

For further clarification and details regarding the above Tax Alert, please feel free to contact Steve Kitching, Tax Partner, Steven Ireland, Tax Director, and Amisha Anil, Tax Assistant Manager.

 

[1] For complete overview on the DAFZA circular, please refer to Grant Thornton’s Tax Alert dated 13 April 2020.

[2] See Grant Thornton’s Tax Alert dated 26 March 2020 for further details.