UAE ESR Update – ADGM and MOF updated FAQs
The Abu Dhabi Global Market (ADGM) and the Ministry of Finance (MOF) have recently updated their dedicated ESR webpages with *new* FAQs sections.
Key takeaways from the FAQs sections:
Does ESR apply to Foundations and Trusts?
Both ADGM and MOF recently confirmed that Trusts and Foundations may fall within scope of ESR should they be carrying a Relevant Activity. It is the MOF understanding that generally, Trusts and Foundations are not allowed to carry out commercial activities; however, in the event that the Trust or Foundation is carrying out a Relevant Activity, regardless of the fact that this activity is not considered a commercial activity per se, the Trust and Foundation will fall within scope of ESR and therefore will have to comply with the ESR requirements.
This review of the ADGM and the MOF FAQ sections brings clarity to the classification of Trust and Foundation vis-à-vis the ESR as previously, the MOF FAQ stated that Trusts and Foundations were not considered as “Licensee” under the ESR, without further explanations.
Following this announcement, Foundations and Trusts are now required to assess and determine whether they conduct any Relevant Activity and fall within the scope of ESR.
When making such a determination, a ‘substance over form’ approach should be adopted. An assessment should not be based just on the activities stated on a license, but the activities that the Trust or Foundation actually conducts.
All Licensees (regardless if they are exempt or have not earned income during the relevant financial year) that undertake a Relevant Activity are required to:
- File an Economic Substance Notification on the Ministry of Finance online portal within six months from the end of the relevant Financial Year;
- In addition, a Licensee that earns income from their Relevant Activity and is not exempt must meet the economic substance test and file an Economic Substance Report on the Ministry of Finance online portal within twelve months from the end of the relevant Financial Year.
To determine the relevant filing deadline, the Licensee that is subject to ESR must consider their incorporation date and Accounting Reference Date (financial year-end).
Dedicated ESR contacts
Since requests for amendments of the Economic Substance Notification or Economic Substance Report are individually reviewed by each Licensing Authority, the MOF provided designated contacts of each Licensing Authority for ESR inquiries and follow-ups:
For any ESR Filing portal technical issues, Licensees should send emails to ESRsupport@cbrain.com.
How can we help?
We strongly recommend that all UAE companies (including Trusts and Foundations), falling within the scope of ESR, review their governance arrangement and put in place all necessary measures to comply with the ESR requirements. Non-compliant practices should be remediated.
Our team is here to guide you through the ESR requirements and ensure full compliance therewith.