The Economic Substance Regulations (ESR) in the UAE represent a pivotal step in the nation's commitment to international tax standards and transparency. These regulations aim to prevent harmful tax practices and ensure that businesses operating within the UAE have substantial economic activity corresponding to their profits. By aligning with the Organization for Economic Co-operation and Development (OECD) Inclusive Framework and addressing concerns raised by the European Union Code of Conduct Group on Business Taxation, the UAE demonstrates its dedication to fostering a fair and competitive business environment.
ESR applies to a wide range of business entities in the UAE, including onshore and free zone companies, partnerships, and other registered business forms engaging in Relevant Activities. Relevant Activities encompass various sectors such as banking, insurance, fund management, leasing, intellectual property, shipping, distribution, and service centers.
It's important to note that ESR compliance is not determined solely by the activities listed on a company's commercial license. A substance-over-form approach is adopted, requiring businesses to evaluate their actual operational activities during a financial period to ascertain ESR applicability.
Engages in deposit acceptance and fund utilization for lending or investments, excluding currency exchange and financial intermediary services.
Accepts risks through insurance contracts, regulated by relevant authorities based on establishment location.
Manages Investment Funds' investments with discretion, excluding administrative and advisory roles.
Operates ships internationally for passenger or cargo transport, excluding certain vessel types.
Offers credit or financing, including to Connected Persons, through various arrangements.
Provides services to foreign group companies, contributing to overall success, involving senior management or risk control.
Holds and earns income from Intellectual Property Assets, including copyrights, patents, and trademarks.
Acquires and holds shares in other companies, earning from dividends and capital gains.
Combines distribution of materials/products with service provision to foreign group companies, excluding third-party transactions.
ESR applies to a wide range of business entities in the UAE, including onshore and free zone companies, partnerships, and other registered business forms engaging in Relevant Activities. Relevant Activities encompass various sectors such as banking, insurance, fund management, leasing, intellectual property, shipping, distribution, and service centers.
It's important to note that ESR compliance is not determined solely by the activities listed on a company's commercial license. A substance-over-form approach is adopted, requiring businesses to evaluate their actual operational activities during a financial period to ascertain ESR applicability.
A Licensee’s financial period should align with the duration for which financial statements, if any, are prepared. For newly incorporated Licensees, this may result in either a short or long first financial period.
The Reportable Period, on the other hand, commences from 1 January 2019 for which the Notification is filed. Its conclusion coincides with the end of the period for which financial statements, if available, are prepared. This period always precedes the financial period in which the Notification must be submitted.
Nummoo stands as a distinguished bookkeeping and accounting firm based in Dubai, renowned for its comprehensive services tailored to meet diverse accounting and finance needs. Our esteemed reputation is upheld by a team of highly qualified accountants and auditors who bring extensive expertise and dedication to every client engagement.
Situated in the vibrant hub of Dubai, our firm prides itself on delivering top-notch solutions that align seamlessly with the dynamic business landscape of the region. Whether you're a small startup or a large enterprise, we understand the intricacies of financial management and offer tailored strategies to optimize your financial operations.
From bookkeeping and payroll services to financial analysis and auditing, our comprehensive suite of services is designed to alleviate the burden of financial management, allowing you to focus on what matters most – driving your business forward.
As per UAE Commercial Companies Law, Federal Law No 2 of 2015, every Company is required to maintain proper books of accounts and appoint a registered auditor to get its books of accounts audited every year.
Address: Dubai, UAE
Phone: +971 58 659 8810
Email: info@numoouae.com
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