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Economic Substance Regulation

ESR Report Preparation

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    Economic Substance Regulation

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    ESR Report Preparation

    The Economic Substance Regulation (ESR) in the UAE requests businesses that engage in defined activities to submit an ESR Report which indicates their economic presence in the country. These reports reaffirm the obligation of entities to comply with tax regulations in the UAE and global standards on tax transparency. Vigor Accounting & Taxation offers support to businesses in the preparation and submission of their ESR reports.

    What is an ESR Report?

    An ESR Report is a required submission to be done by businesses that conduct relevant activities such as banking, insurance, and intellectual property. Providing specific core information about the company’s operations, staffing, management, and assets is what the report does, proving that the business has substantial operations in the UAE. This submission is important to prevent penalties and continue to abide by the UAE law.

    Importance of ESR Report Preparation

    • Ensuring Compliance

      The failure of an organization to execute or submit its ESR report in a timely manner might lead it to being punished with fines that may fluctuate from AED 20,000 to AED 400,000. Besides, submission of the report will be a secure path for each individual to remain in harmony with the UAE systems and international tax laws.

    • Avoiding Penalties

      ESR disobedience can cause monetary sanctions and in severe instances, the discontinuation or confiscation of commercial licenses. Meticulous ESR report creation aids business owners to avoid such situations while working in compliance with legislation.

    • Demonstrating Economic Substance

      The report supplies evidence that a company is producing economic value in the UAE, with the necessary human, capital, and management resources in the country. Corporate transparency about this issue is critical for the business's trust with all relevant parties, both local regulators, and international tax authorities.

    Steps in ESR Report Preparation

    01
    Identify Relevant Activities
    The first step in the preparation of the ESR report is to identify if your business conducts any of the Relevant Activities that are listed by the Ministry of Finance. The activities include banking, insurance, leasing, holding companies, etc. Vigor Accounting & Taxation LLC assists the businesses in determining if they come under the scope of the ESR and should report any activities.
    02
    Prepare the Report
    The full report laying out your business’s Core Income-Generating Activities (CIGAs), number of workers, physical infrastructure, and expenses in the United Arab Emirates must be included in the report. In Vigor Accounting & Taxation LLC, we strive to provide a comprehensive report and make sure that every box on governmental requirements is ticked.
    03
    Gather Documentation
    For the most parts, businesses taking a report have to gather all the needed documents, which include details about staff, physical assets, management decisions, and business expenditures. All the documents show that the company has a good presence in the UAE.
    04
    Submit the Report
    The ESR report must be submitted via the Ministry of Finance (MoF) portal by the prescribed deadline. Our agency helps firms fill out their forms punctually to avoid any breaches caused by late submissions or compliance.

    Key Components of an ESR Report

    The ESR Report must cover several critical components that demonstrate the business’s substantial presence in the UAE

    01
    Core Income-Generating Activities (CIGAs)
    The report must specify the activities directly contributing to the company’s income, which must be carried out in the UAE.
    02
    Employees
    The number of employees involved in CIGAs must be included, along with proof that these employees are based in the UAE.
    03
    Physical Assets
    Companies must show proof of physical tools, for instance, office space or machinery that are critical in performing the necessary activities in the UAE
    04
    Management and Control
    The information provided in the report should be concentrated on presenting the particulars of the key decision-making processes of the organization that took place in the UAE such as board meetings and executive oversight.

    How Vigor Accounting & Taxation Can Help

    At Vigor Accounting & Taxation, we provide thorough assistance in preparing and submitting the ESR reports. Our client-specific reports are designed in such a way that they cover all the elements of the report, thus ensuring both compliance as well as avoiding penalties.

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    ESR Assessment

    We assess your business to determine whether it engages in Relevant Activities and whether it is obligated to file an ESR report. This guarantees that your company remains compliant with the UAE’s ESR laws.
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    Document Preparation

    Our team helps gather the necessary documentation, including financial records, employee details, and information about your business’s management and control.
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    Report Filing

    We assist in preparing and submitting the ESR report on the Ministry of Finance portal, ensuring that all required information is included and submitted by the deadline.

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