Economic Substance in the UAE | Webinar recordings

Businesses in the UAE will be required to start reporting on 31 March 2020. In this session, we focused on practical complexities we encountered when advising on ESR were introduced in the UAE in 2019. These complexities relate to the relevant activity classification, meeting the economic substance tests and the reporting practicalities.

The session was led by Deloitte Tax specialists in the Middle East who, based on case studies, provided the following information on: 

  • Relevant activity classification
  • Meeting the ES tests
  • Reporting practicalities
  • Q&A session

ESR were introduced in the UAE in 2019. The purpose of the ESR is to prevent businesses, typically multinational corporations, from artificially shifting profits to jurisdictions that impose little or no income tax similar without having substantial activities in that jurisdiction to take advantage of their tax laws. The UAE is considered one of these jurisdictions.

Accordingly, the ESR impose an obligation on all entities that carry geographically mobile business activities to annually submit a comprehensive report to the authorities. The aim of this is to demonstrate that these businesses have substance and legitimate operations in the UAE. The first filing season, in relation to FY19, was completed by the end of 2020. Businesses should now be looking at the second filing season.

Given the importance of the ESR, we developed the first of its kind ES guide with a view to support UAE businesses with their reporting obligations. We launched the guide by hosting a 60-minute virtual event where our ES pracitioners provided an overview of the guide and the value it brings. We also provided a technical update on the latest ES developments and insight on how companies are dealing with ES compliance requirements including various available sourcing models. 

The UAE ESR are applicable retrospectively from 1 January 2019 and the first compliance cycle has now passed. Potential ESR implications for FY20 and FY21 are currently being determined. Businesses can leverage the lessons learnt from the past year to improve their approach going forward.  

In the light of the above, Deloitte held a 60-minute webinar aimed at guiding businesses through the upcoming FY20 ESR filing obligations. The topics covered during the session included:

  • Overview of the upcoming FY20 ESR compliance deadlines;
  • Lessons learnt from the first compliance cycle;
  • Best practices in connection with some of the relevant activities and ESR;
  • Post-filing enforcement and appeals;and
  • Elements that are still unclear. 

The UAE Cabinet issued the ESR requiring all UAE onshore and free zone
companies that conduct “Relevant Activities” to have demonstrable
economic substance in the UAE with effect from 30 April 2019.

UAE based companies will be required to report financial data on their
Relevant Activities on an annual basis to the regulatory authority.
Non-compliance with the rules will result in penalties.

On Wednesday, 3 July 2019, Deloitte hosted a 60 minutes webcast session on the introduction of the new Economic Substance Rules in the UAE. Our experts discussed:

  • The newly introduced economic substance thresholds and related compliance requirements
  • How the new requirements will impact UAE based businesses
  • Deloitte’s approach to the new rules

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