Compliance with Economic Substance
Regulations in the UAE

Banking Business

• Raising funds, managing risk, including credit, currency, and interest risk.

• Taking hedging positions.

• Providing loans, credit, or other financial services to customers) Managing capital and preparing reports to investors or any government authority with functions relating to the supervision or regulation of such business.

Insurance Business

• Predicting and calculating risk.

• Insuring or re-insuring against risk and providing Insurance Business services to clients.

• Underwriting insurance and reinsurance.

Investment Fund Management Business

• Taking decisions on the holding and selling of investments.

• Calculating risk and reserves.

• Taking decisions on currency or interest fluctuations and hedging positions.

• Preparing reports to investors or any government authority with functions relating to the supervision or regulation of such business.

Lease-Finance Business

• Agreeing on funding terms.

• Identifying and acquiring assets to be leased (in the case of leasing).

• Setting the terms and duration of any financing or leasing.

• Monitoring and revising any agreements.

• Managing any risks.

Headquarter Business

• Taking relevant management decisions.

• Incurring operating expenditures on behalf of group entities.

• Coordinating group activities.

Shipping Business

• Managing crew (including hiring, paying, and overseeing crewmembers).

• Overhauling and maintaining ships.

• Overseeing and tracking shipping.

• Determining what goods to order and when to deliver them, organizing and overseeing voyages.

Holding Company Business

Activities related to a Holding Company Business.

Intellectual Property Business

Where the Intellectual Property Asset is a:

1. Patent or similar Intellectual Property Asset:
     a) Research and development.
     b) Marketing intangible or a similar Intellectual Property Asset: Branding, marketing, and distribution.

2. In exceptional cases, except where the Licensee is a High-Risk IP Licensee, the Core Income Generating Activities may include:
     a) Taking strategic decisions and managing (as well as bearing) the principal risks related to the development and subsequent exploitation of the intangible asset-generating income.
     b) Taking the strategic decisions and managing (as well as bearing) the principal risks relating to the acquisition by third parties and subsequent exploitation and protection of the intangible asset.
     c) Carrying on the ancillary trading activities through which the intangible assets are exploited leading to the generation of income from third parties.

Distribution and Service Centre Business

• Transporting and storing parts, materials, or goods ready for sale.

• Managing inventories.

• Taking orders.

• Providing consulting or other administrative services.

MOF Portal Goes Live

1st week of December

ESR Re-submission of Notification

From 1st week of December onwards
(notification must be filed within 6 months from the end of the Financial Year)

ESR 1st Annual Report

31 December 2020

Directed and managed in UAE

Having adequate substance

Failure to File Notification to MOF Portal

Failure to Submit Report

Failure to provide accurate or complete Information

1st year of failure

The penalty of AED 50,000 and Information exchange with the foreign competent authority of:

1. Parent company,

2. Ultimate parent company, and

3. Ultimate beneficial owner.

2nd year of failure

The penalty of AED 400,000 and Trade / Commercial License could be suspended, withdrawn or not renewed, and information exchange with foreign competent authority as above.

ESR Assessment or
Re-assessment

Our ESR experts will assist you in understanding the changes in ESR Regulations and help you ensure that your company is compliant with the updated regulations.

Our services include re-assessment of the following:

1. To analyze if the operational activities of the company fall under the scope of updated ESR rules and regulations. Note: The Activity in your License is not the indication to assess the Activity but your actual operations, which we will help you assess.

2. Assessment of the core Income Generated Activities performed by the companies based on the relevant activities guide issued by the MOF.

3. Assessment of the financial and reportable period for Economic Substance purpose.

4. To analyze if the company meets the requirement of the "Exempted Licensee" (that is not required to demonstrate Economic Substance and is exempt for filling ESR Notification and Reporting).

5. Assisting in determining supporting documents for exemptions.

ESR Reporting

1. Preparation of Business Operating Cycle of client's business.

2. Filling up the forms and submission of the ESR Report with the required information on the MOF portal.

3. Determine the value of the below mentioned financial information based on the Relevant Activity selected in the ESR notification:
     a) Total Revenue of the business and the core income related to the particular Relevant Activity for the reportable period.
     b) Accounting Profit / Loss attributable to the business to the whole business and related to the notified Relevant Activity for the reportable period.
     c) Net Book Value of the tangible assets held in UAE for the reportable period.
     d) Operating expenditures incurred of the whole business and concerning that particular Relevant Activity for the reportable period.
     e) Expenditure incurred on outsourcing providers in the UAE with that particular Activity.

4. Preparation of the financial statements like Balance Sheet, Income Statement, Cash Flow Statement & Statement of Changes in Equity for the reportable period of the business as a whole (if required).

5. Preparation of Board Resolution for the board meetings held in UAE during the reportable period.

6. Preparation of Declaration Letters for minutes of board meetings, qualified employees, and physical assets of the Company.

7. Provision of templates for any new information required by the Ministry of Finance or FTA related to submitted ESR Report for the reportable period (if applicable / required).

8. Update on any new amendments in the reporting requirements and templates.