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Process to Comply with Economic Substance Regulations (ESR) in the UAE-

To comply with the Economic Substance Regulations (ESR) in the UAE, follow these essential steps:

1. Assess Applicability:
   • Identify Relevant Activities: Determine if your business activities fall under ESR categories such as banking, insurance, investment fund management, intellectual property, shipping, headquarters, or distribution and service centers.
   • Check Tax Residency: Confirm whether your entity is considered tax-resident in the UAE, including entities in free zones, mainland companies, and foreign branches.
2. Evaluate Economic Substance:
   • Employee Requirements: Ensure your company has a sufficient number of qualified employees based in the UAE who are engaged in the relevant business activities.
   • Physical Assets: Verify that your company maintains appropriate physical assets in the UAE related to the business activities conducted.
   • Operating Expenditures: Confirm that your company incurs adequate operational expenses in the UAE that align with the business activities performed.
3. Prepare and Submit Reports:
   • Economic Substance Report: Compile an annual report detailing compliance with ESR, including information on employees, assets, and expenditures.
   • Submission: File the report with the relevant UAE regulatory authority, such as the Ministry of Finance or the free zone authority.
4. Maintain Compliance:
   • Ongoing Monitoring: Regularly review and update your company’s practices to ensure continued compliance with ESR requirements.
   • Seek Professional Advice: Consult with experts for guidance and support to address any compliance issues or regulatory changes.
5. Respond to Inquiries:
   • Authority Requests: Be prepared to provide additional information or clarification if requested by regulatory authorities regarding your ESR compliance.

Filing of Economic Substance Regulations Return- 

To comply with Economic Substance Regulations (ESR) in the UAE, businesses must file their ESR return within 12 months from the end of their financial year. This return includes the submission of an ESR notification form, and, if applicable, an ESR report that details the entity’s economic activities, income, and how these activities meet the substantial activity requirements set by the regulations.

      Penalties for Non-Compliance with Economic Substance Regulations (ESR) in the UAE-2^nd 

•  Failure to Submit Notifications: AED 10,000 to AED 50,000 per failure.
•  Failure to Submit Reports: AED 50,000 to AED 200,000 per failure.
•  Failure to Meet ESR Requirements: AED 50,000 to AED 200,000 for significant non-compliance, with        potential additional penalties for continued breaches.

     These penalties can vary based on the nature and extent of the non-compliance