Economic Substance Filing

On 30 April 2019, the UAE introduced the Economic Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019), (the “ESR”). On 10 August 2020, amendments were introduced to Resolution 31 by the Cabinet of Ministers by way of Cabinet of Ministers Resolution No. 57 of 2020, which repealed and replaced Cabinet of Ministers Resolution No. 31 of 2019.

The ESR was introduced as part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation.

The ESR applies to Licensees (i.e. legal persons and unincorporated partnerships registered by a competent authority in the UAE and that carries out a “Relevant Activity”) across the UAE, including Free Zones and Financial Free Zones, and requires Licensees that carry on a Relevant Activity and derive income from such Relevant Activity to meet the Economic Substance Test (as defined in the ESR).

United Arab Emirates Economic Substance Regime

The Federal Economic Substance Regime consists of:

Cabinet of Ministers Resolution No. (57) of 2020 concerning Economic Substance Requirements , and  ESR Guidance and Relevant Activities Guide - Ministerial Decision No. 100 of 2020 .

Scope of Application in ADAFZ

ESR requires ADAFZ Licensees that carry on one or more "Relevant Activities" to have economic substance in the UAE in relation to those activities. Relevant Activities are defined in the ESR as:

  • Banking business,
  • Insurance business,
  • Investment Fund Management business,
  • Lease-Finance business,
  • Headquarter business,
  • Shipping business,
  • Holding Company business,
  • Intellectual Property business, and
  • Distribution and Service Centre business.

Please refer to Schedule 1 of  Ministerial Decision 100   for an explanation and examples of each activity.

In ADAFZ, Licensees and Exempted Licensees may include companies, partnerships or branches of foreign companies, that are registered in ADAFZ for financial years commencing on or after 1 January 2019.

The ESR requires ADAFZ Licensees that carry on one or more “Relevant Activities” and earn income from such activities to have economic substance in the UAE in relation to these activities.

Economic Substance Requirements

Notification

All ADAFZ Licensees and Exempted Licensees that carry on one or more "Relevant Activities" are required to file a Notification annually, within 6 months of the end of the financial year of the entity.

Report

ADAFZ Licensees (not Exempted Licensees) that undertake a Relevant Activity from which they earn income during a relevant Financial Year, are required to:

  1. Meet the Economic Substance Test; and
  2. File an Economic Substance Report . 

Economic Substance Filing Portal

The Notifications and Reports must be submitted electronically on the Ministry of Finance Portal, which can be accessed  here

Filing Deadlines

Below stated the filing deadlines for Notifications and ES report, highlighted herewith are the upcoming Notification and ES report filings that are due to be filed by 31 March 2021.



Financial Year End

Notification filing deadline

ES Report filing deadline

31 Mar 2020  

31 Jan 2021 (extended deadline)

31 Mar 2021  

30 Apr 2020

31 Jan 2021 (extended deadline)

30 Apr 2021

31 May 2020

31 Jan 2021 (extended deadline)

31 May 2021

30 Jun 2020

31 Jan 2021 (extended deadline)

30 Jun 2021

31 Jul 2020

31 Jan 2021

31 Jul 2021

31 Aug 2020

28 Feb 2020

31 Aug 2021

30 Sep 2020  

31 Mar 2021  

30 Sep 2021

31 Oct 2020

30 Apr 2021

31 Oct 2021

30 Nov 2020

31 May 2021

30 Nov 2021

31 Dec 2020

30 Jun 2021

31 Dec 2021

31 Jan 2021

31 Jul 2021

31 Jan 2022

28 Feb 2021

31 Aug 2021

28 Feb 2022

31 Mar 2021

30 Sep 2021

31 Mar 2022

30 Apr 2021

31 Oct 2021

30 Apr 2022

31 May 2021

30 Nov 2021

31 May 2022

30 Jun 2021

31 Dec 2021

31 Jul 2022


.

For ‘Economic Substance Filing Portal’ webinar and further guidance on notification filing and relevant activities, kindly visit  https://www.economy.gov.ae/English/economic-substance/pages/default.aspx

For ESR enquiries email:  esr@adafz.ae

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