UAE Economic Substance Regulation Update: I missed the ESR deadline – Now what?
The deadline for UAE Licensees to file the ESR Notification is now passed.
Missing the deadline will trigger fines unless Authorities make use of their discretion to apply a grace period. So far, no grace period for any of the Authorities has been published.
ESR took effect on 30 April 2019. There are a number of actions which relevant Licensees must be undertaking to ensure compliance – from clarifying their entity classification, to the structuring of contractual and delegation arrangements, the review and organization of their internal governance, their employment and premises arrangements and the capturing of relevant business information which will be required for the preparation and filing of reporting information to the Regulatory Authority.
The ESR Notification was the first step for Licensees to comply with ESR obligations and served as the self-declaration of whether Relevant Activities are performed in the UAE.
Should your entity have failed to submit the ESR Notification, it is paramount that this step is remediated as soon as possible so as to mitigate the risk of penalties for late submission of the ESR Notification by the Authorities.
The second step of the ESR requirements is the submission of the “ESR Return” by the end of the year.
All Licensees falling within the scope of ESR must submit the ESR Return to confirm that they complied with the ESR requirements, to wit: (i) the Licensee is being managed and directed in the UAE; (ii) has an adequate number of employees, expenditure, physical assets in the UAE; (iii) the core income-generating activity (CIGA) is being carried out in the UAE.
We strongly recommend all Licensees falling within the scope of ESR to review their governance arrangement and put in place all necessary measures to comply with the ESR requirements from now on. Non-compliant practices should be remediated without further delay.