UAE Economic Substance notification update - deadline extended
Deadline for notification under the Economic Substance Regulations (ESR)
The ESR was introduced in April 2019 in order prevent companies from establishing themselves in the UAE for the purposes of channelling payments which would otherwise be taxable abroad. The introduction of the ESR has successfully led to the removal of the UAE from the EU tax haven blacklist.
Our recent update (which you can find here) provides an overview of the ESR that should help with your preliminary understanding of the regulations.
The anticipated deadline of 31 March 2020 for notification under the ESR has been officially postponed for all regulatory authorities in the UAE. While Younis Haji Al Khouri, Undersecretary at the Ministry of Finance has indicated that the all the Ministry of Finance has communicated to all regulators the cut-off date for notification as 30 June 2020, this remains to be confirmed by the individual and applicable regulatory authorities.
The Ajman Free Zone and Ras Al Khaimah Economic Zone have officially extended the deadline for notification to 30 June 2020 and we anticipate that other free zones will follow suit.
Abu Dhabi Global Market (ADGM) have stated that the 31 March 2020 notification deadline previously advised is no longer applicable. A new deadline date has not yet been announced.
Dubai International Financial Centre (DIFC) have also stated that the 31 March 2020 notification deadline previously advised is no longer applicable. A new deadline date has not yet been announced, however DIFC state that the notification must be filed during Quarter 2 2020 (so before 30 June 2020).
The Ministry of Economy, which is the designated regulatory authority for many of PRO Partner Group’s clients, have remained silent on the official notification deadline. Nevertheless, we recommend that businesses work towards the deadline of 30 June 2020.
The delay to implementation of the ESR presents businesses with an opportunity to review their existing income-related activities to determine whether they result in the entity falling within the scope of the ESR. For guidance on this assessment process, we recommend you consult the flowchart produced by the Ministry of Finance and the Ministry of Finance’s summary of Relevant Activities.
The form for notification and process for lodgement remains unclear in several jurisdictions in the UAE. It is hoped that as the current COVID-19 situation stabilises, the relevant authorities will have more availability to issue guidance on these points.
PRO Partner Group will continue to monitor the announcements closely and keep you updated. In the meantime, we would be pleased to provide you with guidance in relation to conducting the ESR assessment and refer you onto ESR assessment experts if so required.
For more information please contact a member of the team on firstname.lastname@example.org; telephone our Abu Dhabi office on +971 (0)2 448 5120 or our Dubai on +971 (0)4 456 1761 or complete the contact form below. Alternatively, you can email me directly at email@example.com or call me on +971 (0)50 494 4709.