July 06, 2020
The Economic Substance Regulations, or ESR, was issued recently by the UAE government and is aimed at curtailing harmful tax practices by non-domiciled business operators.
The regulations require UAE companies and other UAE business forms to prove that they maintain adequate economic substance in the UAE relative to the activities they undertake. The regulations contain specific requirements on how a company must be directed and managed in the UAE.
The firm will need to have an adequate number of qualified employees in the jurisdiction, incur adequate expenditure in the jurisdiction proportionate to the level of activity and have adequate physical presence in the jurisdiction (for instance, office space, facilities, etc).
What needs to be done immediately is some formalities namely, to perform: ESR Impact Assessment, ESR Gap Analysis, ESR Implementation and ESR Compliances (Compilation and submission of ESR Notification Forms and ESR Returns to the relevant regulating authorities) for your respective companies.
Certain types of companies must be managed or directed from within the UAE, have adequate UAE-based full-time staff, generate most of their income in the UAE, maintain adequate assets and demonstrate adequate operating expenditure in the UAE.
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