Since the year is coming to an end and for most companies the financial year is aligned with the calendar one, a lot of companies started to receive messages from their licensing authorities about ESR filing. This makes a lot of confusion especially amongst small businesses who don’t know whether they need to take any action or not. So I decided to write this post to make the things clearer. This post also explains how to make a notification yourself. The post is intended for small business owners who do not undertake any relevant activities, and the list of such activities can be found following this link.
A few notes on ESR:
· Economic Substance Regulations were introduced by the UAE in 2019 and require businesses to demonstrate that their presence in the UAE is adequate (i.e. they do/don’t undertake relevant activities).
· Both onshore and free zone entities are required to file notification if they undertake any relevant activity.
· It doesn’t matter whether the business is registered for VAT or not – both are required to file notification if they undertake any relevant activity.
· The deadline for filing ESR notification is 6 months following the end of the financial year; the deadline for filing ESR report is 12 months following the end of the financial year.
· Only businesses who are engaged in the relevant activities need to file a notification and a report; or if you are specifically asked by your licensing authority to do so.
· It only takes a few minutes to file a notification so if you are not engaged in any relevant activity and do decide to file a notification, there is no harm in doing so!
· ESR notification for 2021 need to be filed by the 30th June 2022.
And here is how to do it (the deadline for which is 30 June 2022 for the financial year ending 31 December 2021):
Before you start the process, make sure that your trade license is at hand as you will need some details from there.
1) Follow the link to the Ministry of Finance website (might have to click on EN for non-Arabic speakers) https://eservices.mof.gov.ae/Shared/ and create an account for your business (if you still don’t have one). Make sure that in the dropdown menu for the ‘Type’, you choose ‘Corporate’. Other fields are quite straightforward. After first login, you will have to answer 3 security questions, and then you are set to start the submission process!
2) After you are logged in, you need to click on Economic Substance Regulations under Strategic & International Partnership headline.
3) On the next page click on the button ‘Login to ESR Portal’ which will take you to the Dashboard of the submission portal.
4) To start a new notification, you will need to click on ‘Notification’ button.
5) All pages that need to be filled in are quite straightforward, however a few things should be paid attention to:
– Licensee details should be filled in based on your trade license;
– Licensing authority for LLC businesses is the Ministry of Economy;
– Reportable period should be the financial period that is preceding the current financial period. So for most businesses it would be 1 January 2021 – 31 December 2021 if your financial period is the same as the calendar year;
– If you are not sure about your financial year, then follow the dates of your trade license issuance (start date) and expiry (end date).
Here are some useful links:
Here is the webinar with more detailed explanation of the filing process.
Here is the quick overview of the ESR prepared by the Ministry of Finance.
If you encounter problems while submitting the notification, email to esrsupport@cbrain.com.
Good luck with your submission and please feel free to get in touch with me at lena@bespokeaccounting.me if you have any questions!
Elena Barwick