Economic Substance Regulation
ESR Record Keeping Services
Since 20179 Since 2017
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Economic Substance Regulations · turns on what the entity does
Keeping what a later review would ask to see, for as long as it has to be kept.
Overview
What ESR Record Keeping involves
The Economic Substance Regulation (ESR) in the UAE stipulates that relevant activities businesses must keep accurate records in order to be able to demonstrate compliance. The standardized procedure of Record Keeping ensures adequate accounting of the temporary presence of the companies, like the employment records, operational expenses, and the specifics of the core income-generating activities (CIGAs), among others. At Vigor Accounting & Taxation, with the help of our team, businesses are going to be able to introduce effective record-keeping systems to meet the relevant legal requirements and also avoid any fines.
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Why it matters
Importance of ESR Record Keeping
Facilitating Audits
In the event of an audit by the UAE authorities, it is easy for businesses to provide evidence of their economic substance if the records are really well maintained. This includes records of Core Income-Generating Activities (CIGAs), staffing, and financial transactions, which are essential to proving compliance.
Avoiding Penalties
Failure to maintain accurate ESR records can lead to significant penalties, ranging from AED 20,000 to AED 400,000, depending on the severity of the non-compliance. Proper record-keeping minimizes the risk of such penalties by ensuring that businesses are fully prepared for audits or inspections.
Ensuring Compliance
Maintaining accurate ESR records is vital for demonstrating compliance with the regulations of the Economic Substance law of the United Arab Emirates. It is mandatory for companies to retain the same records for at least six years to justify any ESR requests or inspections. These records can serve as proof that a company satisfied all the economic substance requirements, such as possessing the necessary employee strength, office space and management involvement in the UAE.
What is in it
Key Components of ESR Record Keeping
Effective ESR record-keeping involves organizing and maintaining documentation that supports the company’s economic activities in the UAE. Key components include
How Vigor Accounting & Taxation Can Help
At Vigor Accounting & Taxation, we provide tailored solutions to help businesses establish and maintain effective ESR record-keeping systems. Our services ensure that your business remains compliant with UAE regulations and is prepared for any audits or inspections.
Employee Records
Financial and Transactional Records
Physical Asset Records
Board Meeting Minutes and Management Decisions
Custom Record Keeping Solutions
Ongoing Compliance Support
Audit Preparation
Does it reach you
Two regimes, and only one question worth asking first
Every page in this section answers a question further down the chain than the one you actually have. Tick what is true of the business and it says which regime is pointed at you, and which pages matter.
Economic Substance Regulations
Does the entity do any of these?
Nine relevant activities. If none of them is yours, ESR does not reach you.
goAML and anti-money-laundering
Is the business any of these?
Designated businesses and professions report through the goAML portal.
Nothing ticked yet
Tick anything true of your business on either side.
This points you at the right pages. It is not a compliance opinion, and it deliberately states no threshold, deadline or penalty: those are set by the Ministry of Finance and the Financial Intelligence Unit and they change. Whether a regime actually applies to your entity is confirmed by a person who has seen your licence and your activity.
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Government Agencies
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Company formation, licensing, visas, customs codes and tax registration all pass through these authorities. Start a company setup.
Answers
Questions asked about ESR Record Keeping
The 6 asked most often, answered by an adviser.
01Is ESR record keeping mandatory for UAE companies?
Economic Substance Regulations apply to entities carrying on a relevant activity, and those entities must keep records demonstrating that they meet the economic substance test. This typically covers employee records, financial and transactional records, physical asset records and board meeting minutes. Whether it applies to your company depends on whether your licensed activity falls within the defined relevant activities.
02How much does ESR record keeping support cost?
There is no fixed fee for ESR record keeping support, since the scope depends on the size of the business, the volume of transactions and the state of existing records. Compliance and advisory work of this kind is quoted after a review of your current documentation and reporting position.
03What records need to be kept for economic substance purposes?
Entities within scope should retain employee records, financial and transactional records, physical asset records, and board meeting minutes and management decisions. Together these documents evidence that core income generating activities, adequate employees, expenditure and physical presence exist in the UAE. The exact records required depend on the relevant activity carried on.
04What happens if my records are incomplete when filing an ESR notification or report?
Incomplete records make it difficult to demonstrate that the economic substance test has been met, which can lead to a finding of non compliance and associated penalties under the regulations. The specific consequences depend on the nature of the relevant activity and the extent of the gap in documentation, so records should be organised well before any filing deadline.
05How long do I need to keep ESR related records?
Every UAE company must keep accounting and supporting records for at least five years, and this baseline applies equally to documents kept for economic substance purposes. Some records, such as board minutes evidencing management decisions, may need to be retained for longer depending on the nature of the relevant activity.
06Can Vigor help set up an ESR record keeping system for my business?
Vigor Accounting and Taxation designs record keeping systems covering employee, financial, transactional and asset records, along with board meeting documentation, so that a business can evidence its economic substance position. Support also extends to ongoing maintenance of these records and preparation for any related audit or review.
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