How Audit Firms Can Help You to File ESR Notification & Report In Such a Short Notice?
The companies operating in the UAE (mainland, free zone & offshore) are once again facing a compulsion to meet the Economic Substance (ESR) filing requirements as the deadline is around the corner. The UAE-based companies that conduct the relevant activities need to demonstrate adequate economic substance and file the notifications and submit the reports before 31st December 2020.
Companies that have already filed the ESR notification must submit the notification again to the relevant regulatory authorities in sync with the Cabinet Resolution 57 of 2020 which updated several clauses in the previous law. Since the deadline is approaching fast, many companies are floundering to get prepared. Seeking expert assistance of reputed audit firms in Dubai, UAE is the most reliable route to ensure your business entity is complying with the ESR filing requirements. You also need to ensure that your company is aware of the following requirements to be on the right side of the law.
ESR Filing Deadlines
In the updated ESR scenario, businesses that fall within the scope of the regulation must execute the ESR filings through an online portal operated by the UAE Ministry of Finance. The companies with the financial year commencing on or after 1st January 2019 and ending on or before 30th June 2020 must consider the deadline as 31st December 2020. The deadline is the same for those companies with the financial year starting on or after 1st January 2019 and ending on or before 31st December 2019. Your trusted audit firms in Dubai have more clarity on the reporting period, and deadlines and they will ensure that your business abides with the obligations.
Insights on Updated Definitions
A significant area where you need to focus before sending the ESR notifications or returns is the change in the definitions of key terms. For example, a Licensee now means any corporate entity incorporated inside or outside the UAE or an unincorporated partnership in the UAE that conducts a Relevant Activity. Natural persons, sole proprietors, trusts and foundations that were earlier considered as Licensees under the ESR no longer meet the scope of ESR.
Updated Notification & Reporting Requirements
Companies that file the ESR notifications now need to furnish additional details such as the jurisdiction of the Parent Company, Ultimate Parent Company, and Ultimate Beneficial Owner (UBO) who claim to be tax resident. Apart from that, the licensees that are required to file the ESR Report must submit a copy of financial statements. Audit firm in Dubai provides services related to the UBO mainly assistance in maintaining the Real Beneficiary Register. Such assistance gives great leeway to the companies as they can easily submit the UBO details in the ESR reports.
Eases the ESR Filing Requirement for Companies
Article 8 of the Cabinet Resolution 57 of 2020 sheds light on the notification and reporting requirements that the entities must meet to comply with the ESR. It states that every Licensee is now required to file annual ESR notification to the relevant Regulatory Authority. Audit firms in Dubai will assist you in filling the notification with the following mandatory details :
1. Whether the business entity has carried out a relevant activity or not
2. Whether the company has generated any income from the relevant activity
The notification will be filed through the Ministry of Finance’s dedicated online portal. The notification will be processed between the regulatory authorities and the Federal Tax Authority (FTA), which is the National Assessing Authority for the ESR.
The FTA, in its capacity as a National Assessing Authority, will oversee compliance and control of the Updated ESR. FTA, among other things, will also assess if the Licensee has met the Economic Substance Test. It will also decide the necessary course of action to follow if your entity fails to meet the ESR test.
A Helping Hand to Avoid Penalties
Incurring penalties for ESR non-compliance is an undesirable scenario for the smooth functioning of your companies in the UAE. Availing the bespoke services of the UAE audit firms would save the businesses from the hefty penalties.
Here is the list of penalties as per the Cabinet Resolution 57 of 2020 :
1. Companies that fail to submit the annual notifications, or any other mandatory documents/ information will have to pay a penalty of AED 20,000
2. Filing inaccurate information on the notification or ESR Return attracts an administrative fine of AED 50,000.
3. Companies would face a penalty of AED 50,000 if they fail to file Economic Substance Returns or fail to meet the Economic Substance Test.
Penalties of this range could hurt the reputation of the companies apart from hitting them financially. Repeated violations would also lead to license cancellations which makes it necessary for the companies to file the ESR notifications on time.
Dubai Startup Hub records 236% surge in membership during H1
Over 8,200 entrepreneurs have benefitted from Dubai Startup Hub programmes, services and events since its launch in 2016
Dubai Startup Hub, an initiative of Dubai Chamber of Commerce and Industry, recorded a 236 per cent year-over-year surge in membership during the first half of 2020, as accelerated digital transformation led many startups in Dubai and abroad to capitalise on emerging opportunities and bring new solutions to the emirate
Dubai Startup Hub membership reached 1,568 in H1-2020, compared to 466 in the same period last year, while a 13 percent in average monthly growth was observed. Meanwhile, 1,200 entrepreneurs benefitted from Dubai Startup Hub’s programmes and 23 webinars, bringing the total number of beneficiaries to over 8,200.
UAE nationals accounted for a quarter of all Dubai Startup Hub beneficiaries in first half of 2020, while 30 Emirati entrepreneurs are now one step closer to launching their businesses after graduating from the first-ever Emirati Development Programme earlier this year.
In light of Covid-19’s impact on the business landscape, Dubai Startup Hub realigned its offerings and resources to meet the evolving needs of startups in Dubai, while organising virtual events that addressed matters of importance to startups and SMEs such as funding, banking, global expansion, market research and data and digital innovation.
From a global perspective, Dubai Startup Hub collaborated with more than 70 business incubators in countries across the world during Q1 and Q2, including India, USA, UK, Russia, Hungary, Germany and China, and received more than 50 percent of international startup applications for its core programmes.
Among new members, Dubai Startup Hub attracted a large volume of high-potential startups specialising in fintech, healthtech, education, e-commerce, sustainability, wellness and supply chain that emerged in response to changing market conditions, signalling a resurgence in entrepreneurial activity.
In addition, Dubai Startup Hub witnessed growing interest and record participation among international startups, and within the Indian, Chinese and African markets in particular. In an effort to meet this growing demand, Dubi Startup Hub aligned its efforts with Dubai Chamber’s international offices to attract high-potential businesses to the Dubai market.
Hamad Buamim, President & CEO of Dubai Chamber of Commerce and Industry, said Dubai Startup Hub’s performance and achievements reflects the strong entrepreneurial spirit that exists in the UAE, as well as the crucial role that startups are playing in bringing unique business concepts that fill market gaps.
Despite new challenges posed by Covid-19, he noted that the pandemic has created an opportunity for technology startups, in particular, that have demonstrated greater resilience as they capitalised on new market opportunities and benefitted from the various programmes, initiatives and support offered under Dubai Startup Hub, which continues to drive Dubai Chamber’s entrepreneurship strategy.
Going forward, startups and SMEs will have a major role to play building the UAE’s post-Covid-19 economy and developing new industries, he explained, as this segment of the business community serves as an engine driving innovation and supporting the country’s transition to a digitally-driven economy.
Established by Dubai Chamber in 2016, Dubai Startup Hub is the first initiative of its kind in the Middle East and North Africa region. The initiative is designed to emphasise the value of public and private sector collaboration and embodies the aim of encouraging innovation and entrepreneurship as a main driver of the economy of Dubai and the UAE.
Special: Dubai primed to be global business hub
Emirate among best cities equipped for sustained partnerships.
The studies, released on the eve of UN World Cities Day, projected strong, positive and faster growth prospects for the emirate and also rated the city among the world’s top 10 to live in 2021.
While commenting on its city governance and real estate in a post-Covid-19 world, global real estate consultancy JLL said Dubai’s “tight governance arrangements create very strong coordination and clarity around responsibilities, a predictable investment system and the calibre of leadership to drive long-term agenda.”
It said the emirate is quick, capable and productive in responding to opportunities.
“Powers over land use and transport also mean they are far better equipped to enter into sustained partnerships with investors and developers,” it added.
“Business reforms are also supporting the city’s innovation ecosystem. Dubai’s global corridor capability remains stable,” it said.
Professor Greg Clark, author of the reports and global head of future cities and new industries at HSBC, said Middle East, North Africa and Turkey (Menat) is home to bustling cosmopolitan cities with extraordinary histories, and these five in particular are primed to set the standard as future global hubs.
“Their next chapter of growth will depend on how effectively they can work together as a network, and on the individual ability of their economies to drive climate and sustainability-oriented innovation, reinvented trade flows, and the pursuit of human health and happiness,” he said.
“The overarching aim of Dubai’s series of long-term plans is to accelerate the transition towards the innovation economy, more renewable sources of energy and low carbon transport options. A number of more specialised long-term plans support an overarching charter that sets out the government’s vision for the future of Dubai,” HSBC said in its city report.
Resonance Consultancy has also announced the world’s 100 top-performing cities in its annual World’s Best Cities Report, ranking Dubai at sixth, ahead of Singapore, Barcelona, Los Angeles and Madrid.
The study said Dubai’s outdoors clinched the emirate sixth position in overall ranking.
“The city offers outdoor experiences that ranks fifth-most in quality, and it hit the top 10 for both safety and weather, both at No. 8. All the better to chase thrills among Dubai’s plentiful extreme sport offerings. There’s skydiving over the city’s more fanciful developments, the Palm Islands and World Islands. There’s dune bashing in the desert, a high-octane way to experience the environment around the city. And Dubai has even pioneered the sport of sandboarding, which is exactly what it sounds like,” said Chris Fair, president and CEO of Resonance Consultancy.
“Dubai is a city of superlatives: you can ride the elevator to the top of the world’s tallest building for a bird’s-eye view, bet on the ponies at the world’s richest horse race and pose for photos in front of the world’s tallest choreographed fountains. These experiences are not by accident: the city reinvented itself yet again throughout the 2010s, growing from a sterile playground for a handful of ultra-rich Emiratis to an international tourism and business destination. That has helped to attract the second-highest proportion of foreign-born citizens of any city worldwide, and they’re a sharp crowd, ranking No. 16 for Educational Attainment globally,” it added.
FTA to issue tax residency and commercial activities certificates
The authority will begin receiving applications for the issuance of Tax Residency and Commercial Activities Certificates via its e-services portal as of November 14, 2020.
The FTA explained that there are two categories of tax certificates which are issued to companies and individuals. The first category is for the ‘Tax Residency Certificate’, a certificate issued by the FTA upon request to enable applicants to benefit from Double Tax Avoidance Agreements (DTAA) signed between UAE and other countries.
The second is the Commercial Activities Certificate which is a certificate issued by the FTA to enable applicants to refund VAT paid in advance outside the UAE, whether or not DTAAs are applicable.
The authority emphasized that the new service provides advantages and ease for the issuance of certificates to those registered with the tax system, as all their data is available in the FTA database so they can apply for Tax Certificates through direct and quick digital procedures.
Khalid Ali Al Bustani, director-general of the FTA, confirmed that this step is part of an ongoing cooperation between the FTA and the Ministry of Finance as a strategic partner to the authority, noting that a joint working group from both entities have made the necessary arrangements to ensure a smooth transfer for the digital issuance of Tax Residency and Commercial Activities Certificates from the ministry to the authority.
“Both Tax Residency and Commercial Activities Certifi-cates allow investors in the UAE, including companies and individuals, to benefit from double taxation avoidance agreements to which the State is a party, with the aim of preventing duplication, in addition to recovering VAT imposed on Emirati businesses in various countries in the event they were registered with the Authority,” Khalid Al Bustani said.
The authority clarified that eligible individuals can easily issue Tax Residency and Commercial Activities Certificates through a simple registration process via the Federal Tax Authority’s official website. The process is completed by submitting the required supporting documents and paying the fees specified in the UAE Cabinet Decision No. 65 for 2020. These specified fees were set as a requirement to apply for the Tax Residency Certificate, as an application is reviewed for any normal or legal person that is not registered with the authority and providing a print copy of the digital Tax Residence Certificate.
The Cabinet Decision also set the fees required to apply for a Commercial Activi-ties Certificate for businesses registered with the Authority, and to review the ap-plication and issue a digital Commercial Activities Certificate and to provide a print copy for the certificate that was issued.