ESR Development and Deadline in the GCC Countries
UAE:
With the upcoming deadlines for ESR reporting on 31 December 2021, here is what you need to know to stay compliant and avoid penalties in the UAE.
Who:
- Licensee - All UAE onshore and free zone companies that undertake one or more "Relevant Activities" during the Financial Year ("FY") are required to file a Notification and submit an Economic Substance Report to the UAE Ministry of Finance ("MoF") portal.
When:
- Compliance requirement under Economic Substance Regulations ("ESR") is annual.
- For companies with FY ending on 31 December 2020:
- Notification had to be submitted by 30 June 2021.
- Economic Substance ("ES") Report must be submitted by 31 December 2021.
Penalties for non-compliance are as follows:
- Failure to file the Notification within 6 months from the end of the FY - AED 20,000.
- Failure to file the ES Report within 12 months from the end of the financial year - AED 50,000.
- Consecutive violations during two consecutive FYs - AED 4000,000.
A Broader look into the other GCC Countries
Qatar
- On 17 October 2021, the Qatar MoF issued Decision No. 20 of 2021 requiring "qualifying entities" that carry on specified activities to demonstrate ES in Qatar from 4 November 2021, if they wish to benefit from a preferential tax regime.
- Qualifying entities will be required to comply immediately, based on their date of incorporation.
- Penalties for non-compliance are to be determined in due course.
Kingdom of Bahrain
- MoICT has issued a circular on 10 August 2021 mandating the filing of ESR Return for applicable entities through ITIES web portal within 3 months from the FY end.
- The filling period for ES returns for the FY end of 2020 will be from 8 August 2021 to 12 September 2021.
- Penalties for non-compliance include warning notices, suspension/termination of Commercial Registration, financial penalties up to BD 100,000.
KSA, Oman, and Kuwait - Not yet regulated
Key takeaways Licensees must:
- Take note of the ESR deadlines
- Ensure that all ESR requirements are met in a timely manner to avoid possible penalties from the relevant Tax Authority.
How can Crowe Help?
- Determine the appropriate Relevant Activity
- Review past fillings (Analyze/ Re-analyze the applicability of ESR)
- Assess if the entity meets the ES Test
- Assist in submitting the Notification and ES Report
- Assist in responding to queries from relevant UAE authorities
- Assist with the appeal procedure, if applicable.