ESR Update: DACC and UAQFZA Extended the Deadline for ESR Notification Submission

Dubai Aviation City Corp. (DACC), being among United Arab Emirates’ regulatory

authorities, published a circular regarding the filing of notification for economic substance. All

companies that are under its jurisdiction are to comply. As per the new circular which was

recently issued, all licensees in DACC have to submit the economic substance notification on or

prior to the 23rd of June 2020. Licensees are advised to submit prior to the deadline and seek the

help of experts to ensure all information supplied to the authority are accurate.

Umm Al Quwain also published an extension to the due date for the filing of an economic

substance notification, which is now moved to the 30th of June 2020. All licensees

under UAQFTA are to provide notification as per the new circular issued. It is best not to expect

any other extension to the due date for notification filing in order to avoid penalties for non-

compliance.

ESR Deadlines set by other regulatory authorities in the UAE are as follows:

ESR Deadlines for notification filing to avoid penalties for non-compliance Name Deadlines

Ajman Free Zone 30th of June 2020

Fujairah Free Zone 15th of June 2020

RAK Economic Zone 30th of June 2020

RAK Int’l Corporate Center 30th of June 2020

Sharjah Int’l Airport Free Zone 30th of June 2020

Jebel Ali FZ Authority 30th of June 2020

Dubai Dept. of Economic Development 30th of June 2020

If a licensee fails in complying with all the requirements for the filing of notification for

economic substance in UAE to the relevant regulatory authority, such licensee will face penal

consequences that are laid out in Cabinet Resolution (no 31) of 2019 Article 11 on Economic

Substance Regulation (ESR).

Penalties for violations to the regulations range from Dhs10,000 to Dhs50,000 for non-

compliance on the first year of implementation and Dhs50,000 to Dhs300,000 for subsequent

violations. Failure to provide notification to relevant authorities can also lead to commercial or

trade license withdrawn, suspended, or not renewed upon expiry. It is best to speak to regulatory

experts in the UAE as soon as possible.

ESR in UAE: Law requirements

The Economic Substance Regulations in UAE requires relevant businesses to report to

authorities on whether they are engaging in a relevant activity, which is listed below, during any

point in a financial period starting from the 30th of April 2019.

There are different kinds of business activities that are considered as ‘Relevant Activities’ as per the new legislation and they are as follows:

• Insurance business

• Banking business

• Finance and leasing

• Fund management

• Shipping business

• Intellectual property business

• Holding business

• Headquarters business

Take note: even if your company doesn’t conduct any of the activities that were mentioned

above or a resident of UAE, it is likely that you are still required in reporting certain information

to regulatory authorities.

The transitional period for all existing business entities in complying with the new legislation on

the economic substance has already passed. Compliance is now required for all businesses.

Compliance with ESR will be measured according to financial periods of no more than twelve

months each.

Lack of compliance or any violation of reporting requirements can result in penalties. It is also

possible for violations to result in the removal of the business’ UAE registration status.

What are the entities that are affected by ESR in UAE?

Legal entities, including foreign limited partnerships and foreign companies, are all subject to the

rules of economic substance in UAE if they meet certain criteria such as the following:

• Is a resident of the UAE

• Is a legal entity that is identified as being a subject to ESR

• Is a business that conducts a relevant activity during a financial period wherein it

generates income from such relevant activity

All the licensees that are indirectly or directly owned by an Emirate government or Federal

government are exempt from the new regulations on economic substance. A UAE government

authority or body is also exempt.

Seek the help of ESR regulatory Experts

The United Arab Emirates provides businesses with various attractive incentives, which is why

the entire region is considered as a magnet for entrepreneurs and investors, local and foreign

alike. However, with the enactment of ESR in UAE, regulations have evolved.

At Farahat & Co, our knowledge, skill, and expertise of the rules and regulations of the UAE

combined with the dedication of our regulatory experts, help ensure full, ongoing compliance for

businesses that are affected by the new legislation. With our team’s guidance, you will be able to

receive help in understanding and navigating the local market, as well as ensure compliance with

ESR.

Source - https://farahatco.com/blog/deadline-for-esr-notification-submission/

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