The United Arab Emirates is one of the best places for setting up and conducting business. In the past, we have seen many reputed companies setting up their headquarters in the Middle East. In the Middle Eastern region, the United Arab Emirates is considered one of the best locations due to many reasons. Some of the reason are listed below:
- The Progressive and Growing Economy
- A Strategic Location
- Presence of Diversified Markets
- Strong Cultural Background
- Suitable Business Environment
Apart from this, the Middle East provides one of the most developed economies and also provides new and upcoming businesses access to some of the best infrastructure and technologies. These are some of the reasons due to which setting up and operating a business in the United Arab Emirates is a dream for setting up a business for any businessman and entrepreneur.
With the increasing number of people coming in, there has been a gradually increasing number of cases of fraud. Also, the businesses do not provide the proper information which will help the economy of the country. To remedy this situation, the government of the United Arab Emirates launched the ESR regulation on 30 April 2019.
On 10 April 2020, the government of the United Arab Emirates made an amendment (Cabinet Minister Resolution 57 of 2020) in the Economic Substance Regulations, which has made many changes in the ESR regulations. Some of the important changes in the Penalties and the reporting requirements which have been made by the amendment are mentioned below.
Reporting Requirements and Economic Substance Test
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Relating To |
As Per Earlier Resolution |
As per Amended Resolution |
|
According to the earlier resolution, there was no requirement for the businesses to provide the Financial Statements for the filing of the Economic Substance Report. | It has now become a necessity for the business to provide financial statements to fill out an Economic Substance Report. |
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A minimum of one test of the business was conducted every year, according to the previous regulations. | The requirement of having a minimum of one test every year has been removed. This decision will now be dependent on various factors such as the nature of the work conducted, the volume of business, etc. |
These were the amendments made in relation to the various requirements which need to be fulfilled by a business.
In case the business is unable to fulfill the needs and requirements mentioned according to the new amendment made, the business will have to face certain penalties.
Changes in Penalties
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Relating to |
As per Earlier Resolution | As per Amended Resolution |
|
In the earlier resolution, the following penalties are levied:
The concerned authorities may also impose various suspensions on the company, or the company will not be able to renew its license.
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As per the amended resolution, the following penalties are levied:
The concerned authorities may also impose various suspensions on the company, or the company will not be able to renew its license.
|
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Earlier the business had to pay a fine ranging from AED 10,000 to AED 50,000. | According to the new amendment, a fixed fine of AED 20,000 was levied on the businesses. |
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A fine of ranging from AED 10,000 to AED 50,000 was levied. | A fixed fine of AED 50,000 is levied on a business according to the amendment. |
In the aforementioned table, we have tried to provide a simplified comparison of the penalties which were levied in the earlier of the various reporting requirements and the penalties which were levied previously as well as the new amended penalties and requirements.
If you are looking for any other information about the amendment made for the Economic Substance Regulation, then you can have a consultation with our expert at JAXA Chartered Accountants. The panel of experts at JAXA will provide you with the correct and accurate information, which will prove imperative in the growth of the business. For more details, Contact Us. We will be glad to help.
