Economic Substance Regulation

Economic Substance Regulation (ESR) Registration

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    Economic Substance Regulation (ESR) Registration

    The identification of one's substantial economic is the fundamental motive behind creating Economic Substance Regulation (ESR) THE BRN for the purposes. The key provision of the Economic Substance Regulation (ESR) in the UAE is requiring the entities involved in the respective activities to not only prove their existence but also some meaningful connection to the domestic economy. The relevant Activities that are applicable to this relation include banking, insurance, shipping, and intellectual property. We at Vigor Accounting & Taxation, are top rankers of ESR registration forms to help businesses to comply with the law and avoid penalties.

    What is Economic Substance Regulation (ESR)?

    ESR’s implementation came after the UAE authorities decided to adopt a more rigorous global standard, as promoted by the Organisation for Economic Co-operation and Development (OECD), which aimed at the curbing tax avoidance scheme such as base erosion and profit shifting (BEPS). The ESR is legal requirement that came into force in the UAE, that local entities have a sufficient presence in the Abu Dhabi by applying various conditions such as having enough employees, equipment as well as supervision in the country.

    The pertinent activities contain the following

    • Banking
    • Insurance
    • Investment Fund Management
    • Lease Finance Businesses
    • Headquarters Businesses
    • Shipping
    • Intellectual property (IP) businesses
    • Holding companies
    • Distribution and service centre businesses

    Importance of ESR Compliance

    The UAE has implemented strict AML regulations to safeguard its financial system from abuse by criminal organizations. Filing an FFR is a critical component of this compliance framework for several reasons

    • Regulatory Compliance

      All the UAE companies that do the operations subject to the relevant activities are required to submit ESR notification every year in the UAE. Moreover, those who make money from such activities are mandated to file an Economic Substance Report, which is a proof of them meeting the necessary economic substance conditions.

    • International Transparency

      Enforcement of ESR by UAE companies ensures that the companies are in sync with the global tax standards. The legislation is meant to make UAE a country that is difficult for companies to transfer profits and avoid taxes in their home countries. This will help curtail tax fraud in the UAE, and UAE will not be a place where companies who are avoiding taxes will shift profits. Demonstrating compliance with ESR, companies get to keep their place in the global market and nullify risks associated with their reputation loss.

    • Avoidance of Penalties

      1. Companies or individuals that are ESR non-compliant may be liable to huge amounts in monetary terms of penalties.

      2. There are always going to be safeguards to protect the environment, but those businesses that do not adhere to the requirements must be subjected to ESR. Businesses that do not comply with the reporting requirements are liable to be fined with amounts of between AED 20,000 and AED 400,000, but the gravity of the violation depends on<

    How to Determine ESR Applicability

    Here Vigor Accounting & Taxation, provide services that help businesses in answering the question if they are within the ESR by means of the identification of properties. We directly guide companies through the identification process of the relevant activities and compliant activities in case of non-compliance.

    The evaluation mostly involves:

    01

    The final analysis of the company's operational and management structure.

    02

    The review of the company's relevant operations.

    03

    • The analysis of income that is derived from these operations.

    Key Steps in the ESR Registration Process

    At Vigor Accounting & Taxation, we simplify the FFR filing process, ensuring that businesses follow the correct procedures to stay compliant. Here’s an overview of the steps involved

    01
    Filing the ESR Notification
    Firms or organizations carrying out any activities that can be treated as earnings subject to ESR must file an ESR Notification report every year. Most of the time the Ministry of Finance (MOF) portal is used. The notice must give details of the respective activities done, income gotten, and whether the business has made any profits that attract ESR to it, or not.
    02
    Preparing the Economic Substance Report
    If a company has relevant activities, that are the means of learning the money, it should submit an Economic Substance Report. This report must include details like the number of employees, assets in the UAE, and how decision-making processes are conducted within the boundaries of the company.
    03
    Demonstrating Compliance
    Companies must prove that they are really present in the UAE and have a sound economic presence there. This will be done by fulfilling some specific criteria for the CIGAs which produce the core income for each eligible activity. These conditions are:
    • Adequate employees physically present in the UAE.
    • Appropriate premises.
    • Expenditure incurred in the UAE related to the relevant activities.

    How Vigor Accounting & Taxation Can Help with ESR Compliance

    The reputation of Vigor Accounting & Taxation is associated with expertise in facilitating a better understanding of ESR in business settings. Our services cover

    01
    ESR Assessment
    We examine your business operations to know if they are subject to ESR. In doing this, we distinguish related activities, calculate the revenue and determine if the business are qualified.
    02
    ESR Notification and Reporting
    Our involvement spans from putting the ESR advocating and the Economic Substance Report together to their submission online. Our staffs are responsible for having all information correctly completed which reduces potential oversights.
    03
    Ongoing Compliance Support
    Ongoing ESR compliance is mandatory for a business to operate. We provide ongoing support to make sure that your business is always up to date with changing regulations and stays legal in UAE.

    The Economic Substance Regulation (ESR)

    compliance is a very essential thing for the companies that are involved in one of the relevant activities of the United Arab Emirates. The non-compliance of these rules may lead to the imposition of the fines and the deterioration of the reputation of the company. Vigor Accounting & Taxation is the perfect place to get your ESR-related queries addressed; we provide expert advice on registering and reporting ESR. This in turn helps the company to work within the legal framework and at the same time, to avoid the fines.

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