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Economic Substance Requirements in the UAE for DIFC Entities - Revised Deadline

With respect to Economic Substance Regulations, Dubai international Financial Center has recently announced a notification filing update to be carried out through the DIFC Client Portal.

 

Revised Notification Deadline – 12th of June 2020  

Following the recent update from the DIFC, the notification deadline for Licensees registered in DIFC is 12th of June 2020. 

 

Return/ Report Deadline – 31st of December 2020  

  • Return/Report filing requirement applies to DIFC Licensees that undertake a Relevant Activity   
  • DIFC Licensees that undertook a Relevant Activity during financial year ended 31stof December 2019 must submit the Return/ Report by 31st of December 2020 i.e. 12 months after the financial year end 

 

Economic Substance Test for DIFC entities:  

In order to meet the Economic Substance Test, a DIFC Licensee needs to demonstrate all three of the following conditions: 

  • Adequate employees, physical assets & expenditure in the UAE
  • Core Income Generating Activities (“CIGA”) are undertaken in the UAE
  • Directed and managed in the UAE

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

As per the guidelines introduced by the DIFC, in order to determine whether a Relevant Activity is taking place, a substance over form approach should be followed.  This means looking beyond what is stated on the commercial license to what activity is being undertaken by the entity.  

Penalties for non-compliance

Non-compliance with the obligation to file an economic substance notification before the deadline may be subject to a fine of up to USD 25,000 from the Registrar of Companies under Article 31(2) of the Operating Law, DIFC Law No. 7 of 2018. In addition, penalties ranging from AED10,000 to AED50,000 will be imposed under ESR. The fines increase to between AED 50,000 and AED 300,000 for the subsequent fiscal year.

With respect to Economic Substance Regulations, Dubai international Financial Center has recently announced a notification filing update to be carried out through the DIFC Client Portal.

 

Revised Notification Deadline – 12th of June 2020  

Following the recent update from the DIFC, the notification deadline for Licensees registered in DIFC is 12th of June 2020. 

 

Return/ Report Deadline – 31st of December 2020  

  • Return/Report filing requirement applies to DIFC Licensees that undertake a Relevant Activity   
  • DIFC Licensees that undertook a Relevant Activity during financial year ended 31stof December 2019 must submit the Return/ Report by 31st of December 2020 i.e. 12 months after the financial year end 

 

Economic Substance Test for DIFC entities:  

In order to meet the Economic Substance Test, a DIFC Licensee needs to demonstrate all three of the following conditions: 

  • Adequate employees, physical assets & expenditure in the UAE
  • Core Income Generating Activities (“CIGA”) are undertaken in the UAE
  • Directed and managed in the UAE

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

As per the guidelines introduced by the DIFC, in order to determine whether a Relevant Activity is taking place, a substance over form approach should be followed.  This means looking beyond what is stated on the commercial license to what activity is being undertaken by the entity.