The UAE government issued Economic Substance Regulation (ESR) in April, 2019 and thus, introduced requirements for the UAE entities to maintain an adequate economic presence in the country, of course in relation to the activities they undertake. In fact, the UAE Federal Tax Authority (FTA) has begun the process of introducing many economic substance regulations including the audit and assessment of UAE businesses. If you’re a business owner in the UAE and have not considered the impact of the UAE ESR on your business, MBK Auditing is ready to analyze the business activities and then provide guidance about the steps needed to comply with the Economic Substance Regulations (ESR) in Dubai. We’ve an experienced ESR designated team, which will be happy to assist you. It is necessary to point out here that the documentary requirements from the FTA for audit or assessment purpose are extensive and in many cases, deadline of just five days was given to submit all the requested information. This poses serious challenge to the business owners as it is difficult to furnish details in such a tight deadline.
The economic substance requirements are applicable to all onshore and free zone companies besides certain other business forms. The entities in the country need to assess, whether their activities fall under the scope of the ESR and if yes, underline the specific activities. The business owners also need to reveal, how they ensure to meet the mandatory requirements in respect to each relevant activity. This is quantitative and qualitative assessment and involves legal and government matters, besides financial, operational, and tax/transfer pricing. The audit, assessment or clarification activities of the FTA are likely to start soon. Of course, there is no guarantee that FTA is going to audit or assess all business entities, but in view of the short deadlines imposed by the FTA, it is good to get prepared with the likely requests in anticipation of receiving an audit . The FTA requests may include (but not limited to); a comprehensive and detailed clarification on the nature of the relevant activity, documents for the calculation of their relevant income, board meeting minutes, agenda and resolutions for the meeting, furnishing evidences that non-resident directors, who form the quorum were present during the board meeting and much more.
