Economic Substance Regulations Frequently Asked Questions

Download Economic Substance Regulations Frequently Asked Questions by MOF UAE. It includes answers to ESR FAQs like:

1. Why has the UAE introduced Economic Substance Regulations?
2. Why should a business comply with the Economic Substance requirements?
3. When do the ESR Regulations enter into force?
4. Who are the ESR “Regulatory Authorities”?
5. Who is the Economic Substance Regulations “National Assessing Authority”?
6. Who is subject to the ESR Regulations?
7. What is a Licensee?
8. The business activities that I undertake do not meet the requirements of any of the
Relevant Activities listed, am I subject to the Economic Substance Regulations?
9. Are branches subject to the ESR Regulations?
10. Where do I report the details of my branch?
11. Will the Regulatory Authorities tell businesses if they are subject to the Economic Substance Regulations?
12. What does it mean to be subject to the ESR Regulations?
13. Do the ESR Regulations only apply to UAE entities that are part of a foreign multinational group?
14. Is a company registered under an ‘offshore’ free zone company regime subject to the
Regulations?
15. If the Ultimate Beneficial Owner of the Licensee is a UAE national or UAE resident
individual, does the company still need to file an ESR Notification?
16. Do the activities listed on the commercial license determine whether a Licensee undertakes
a Relevant Activity under ESR?
17. When should a Licensee assess whether it undertakes a Relevant Activity?
18. How should a Licensee determine its financial period for Economic substance purposes?
19. Who is exempt from the ESR Regulations?
20. What if a Licensee does not undertake a Relevant Activity during a financial period?
21. My business was just set up, if I undertake a Relevant Activity (or plan to) by when should
I file ESR Notification?
22. I currently do not undertake a Relevant Activity, but this may change in 6 or 10 months’
time. Am I required to file an ESR Notification now?
23. What if the Licensee undertook a Relevant Activity for only part of a financial period?
24. What if the Licensee carried on a Relevant Activity historically but no longer does, is the
Licensee required to submit a Notification and Economic Substance Report every year until
liquidation?
25. What if a Licensee undertakes a Relevant Activity, but does not earn any income from that
activity during a financial period?
26. Is there a minimum level of income that must be met for the Economic Substance
Regulations to apply?
27. What if all income from the Relevant Activity is earned from outside the UAE, is the Licensee
exempt from the ESR Regulations?
28. What if the Licensee is in liquidation (or otherwise ceases to exist), is the Licensee
required to comply with the ESR Regulations?
29. What if the Licensee changed its legal form in respect of a historical Reportable Period?
30. What is “adequate” or “appropriate” economic substance?
31. Will economic substance be assessed on a Licensee by Licensee basis, or can Licensees that
are part of the same group elect to be assessed on a ‘consolidated’ basis?
32. Does a Licensee need to hold board meetings in the UAE?
33. Do employees who perform the CIGAs need to be resident in the UAE?
34. Do the directors of the Licensee need to be resident in the UAE?
35. Can directors be counted as employees?
36. Is having a UAE Tax Residency Certificate for a financial period proof of meeting the
Economic Substance Test for that relevant period?
37. What can a Licensee outsource?
38. To whom can a Licensee outsource?
39. What should a Licensee do under an outsourcing arrangement?
40. Can a Licensee outsource any of its activities to a foreign person?
41. What is a “Distribution and Service Centre” Business?
42. Does a business that purchases goods from a foreign group company and sells such goods
(in or outside the UAE) fall within the scope of a Distribution and Service Centre Business, if the
goods are directly dispatched to the customer by the foreign group company?
43. What is a Holding Company Business?
44. Are investment funds subject to the Regulations as a Holding Company Business?
45. Does a Holding Company Business need to demonstrate economic substance?
46. What are the conditions for an IP Business to be considered as “High Risk”?
47. What does it mean if a Licensee has a “High Risk” IP Business?
48. What is a UAE Investment Management Business?
49. What is a Lease-Finance Business?
50. What does it mean to offer credit or financing?
51. Is lending to another group entity considered a “Lease-Finance Business”?
52. Is investing and trading in debt securities considered undertaking a Lease-Finance Business?
53. What does consideration for the purposes of a Lease-Finance Business include?
54. What is a Headquarter Business?
55. Does an entity need to be the ‘parent’ company to be considered a Headquarter Business?
56. Can an entity be considered engaged in a Headquarter Business in addition to carrying on
another Relevant Activity?
57. What help can the MoF call center provide?
58. I called a Regulatory Authority and was told they are unable to support me with my Economic
Substance query, what should I do?
59. I have made a request to amend my Notification (or Economic Substance Report), when will the
request be approved?
60. Who needs to submit a Notification and by when?
61. If my business carries out multiple Relevant Activities should I submit individual
Notifications and Economic Substance Reports for each Relevant Activity?
62. Should I file a Notification even if I did not earn any income during this financial period?
63. Can a single Notification be submitted for multiple Licensees?
64. Will the Economic Substance Portal issue a reminder to submit a Notification for future
financial periods?
65. Who needs to file an Economic Substance Report and by when?
66. Are there cases where a business is only required to submit a Notification and not file an
Economic Substance Report?
67. Will a Licensee be required to comply with the filing requirements every year?
68. Will a Licensee receive a confirmation after submitting a Notification or Economic
Substance Report?
69. Can a Licensee change the email address used to receive email correspondence relating to
Economic Substance?
70. Are copies of the updated Notification and Economic Substance Report forms available?
71. What are the penalties for non-compliance?
72. Will a business face a late filing penalty if its Exempted Status is denied after the original
Economic Substance Report filing deadline for the relevant financial period?
73. If a Licensee has paid a penalty but was subsequently granted an appeal by the FTA for that
penalty, how can the Licensee request a refund?
74. What should a Licensee consider before the end of a financial period?
75. Can the Ministry of Finance recommend a company to help us with Economic Substance?
76. If my business is subject to Country by Country Reporting, will I also be required to
comply with the Economic Substance Regulations?
77. If my business is subject to Ultimate Beneficial Owner Reporting, will I also be required to
comply with the Economic Substance Regulations?
78. Can you file an Economic Substance Report immediately after filing a Notification?
79. Do the Financial Statements to be submitted along with the Economic Substance Report
need to be audited?
80. The Economic Substance Report does not require me to provide evidence regarding
assets, expenditure, board meetings held in the UAE and other questions asked. Do I need to
keep this information on file and if so for how long?
81. Is a company that is registered as an offshore free zone company considered tax resident
outside of the UAE for ESR purposes?
82. Do the supporting documents for an exemption have to be notarized / certified by a
public notary or relevant government authority?
83. Will I be required to answer all the questions included in the Economic Substance Report
template available on the Ministry of Finance website?
84. If my licensing authority is a DED, which Regulatory Authority should I select?
85. Why can’t I select a Holding Company Business and another Relevant Activity?
86. I can’t log in because I haven’t received my activation email after creating my MoF
account
87. Will my Regulatory Authority receive my Notification and Economic Substance Report
through the Economic Substance Filing Portal

All FAQs by ESR UAE