Master UAE Compliance: Key Steps for Economic Substance Reporting

Jun 12
Understanding the Economic Substance Reporting Requirements for UAE BranchesThe Economic Substance Regulations (ESR) in the UAE mandate that licensees, including branches, carrying out Relevant Activities must submit an Economic Substance Report. This ensures that businesses in the UAE have substantial economic activities and are not just used for tax avoidance purposes. Here, we will explore the key components and requirements of this report, providing practical examples and visual interpretations to enhance comprehension.

Key Sections and Their Requirements

A. Reporting Relevant Activities

Who Needs to Report?
Licensees with UAE branches involved in Relevant Activities must report these activities in their Economic Substance Report.

B. License Details
What Details Are Required?

Commercial License / Trade License / Permit Number: This is the unique registration number found on the branch's commercial or trade license.
Licensing Authority: The entity that issued the license, such as the Department of Economic Development or a Free Zone Authority.

C. Reportable Period
When Do You Need to Report?

The Reportable Period is the accounting period starting on or after 1 January 2019. The start and end dates should match the financial statement period, if any.

Examples:
A financial year matching the Gregorian calendar year:
Start date: 1 January 2019
End date: 31 December 2019

A short period of account for a company incorporated on 1 October 2019:
Start date: 1 October 2019
End date: 31 March 2020

A long period of account for a company incorporated on 1 January 2019:
Start date: 1 January 2019
End date: 31 March 2020
D. Updated Information
How to Address Changes?

Licensees must indicate if any answers to specified questions differ from the previously filed Notification for the Reportable Period.

E. Financial Information
What Financial Data is Needed?

  1. Audited Financial Statements: Confirm if audited financial statements for the Reportable Period are available.
  2. Currency Used: Financial information must be in AED or USD.
  3. Total Revenue: Income from ordinary activities as reported in the first line of the income statement.
  4. Accounting Profit/Loss: The profit or loss as per the licensee’s stand-alone financial statements.
  5. Net Book Value of Tangible Assets: The value of tangible assets net of accumulated depreciation and impairment losses.

Examples of Tangible Assets:

  • Property, Plant, and Equipment
  • Inventory
  • Receivables
  • Cash
Conclusion
The Economic Substance Report ensures that UAE branches substantiate their economic activities. By understanding the requirements and preparing accurate reports, businesses comply with UAE regulations and contribute to a transparent economic environment.

Questions for Consideration:
Who needs to report Relevant Activities?
What specific details must be included in the report?
When is the Reportable Period for your financial year?
How should changes in previously reported information be addressed?
What financial data is required, and in what currency?

By answering these questions and providing the necessary information accurately, businesses can ensure compliance with the UAE's Economic Substance Regulations.

How FastLane Can Help
FastLane specializes in helping businesses navigate the complexities of Economic Substance Reporting. Here’s how we assist:

  • Expert Guidance: We identify if your branch needs to report Relevant Activities and guide you through the entire process.
  • Detail Management: FastLane ensures that all specific details, such as licensing numbers and authorities, are accurately included in your report.
  • Reportable Period Accuracy: We help determine the correct Reportable Period for your financial year, ensuring compliance with regulations.
  • Change Tracking: Our team manages any changes in previously reported information, ensuring your report is up-to-date and accurate.
  • Financial Data Preparation: We assist in compiling and converting financial data into the required currency, ensuring all financial statements meet regulatory standards.

With FastLane, you can confidently handle your Economic Substance Report, ensuring compliance and contributing to a transparent economic environment in the UAE.
Created with