The due date for Economic Substance Notification is declared by the authority of the Dubai Airport Free Zone (DAFZA) being one of the Regulatory Authority in the UAE. It published the due date to file the Economic Substance Notification for all companies registered under it. As per the circular issued by Dubai Airport Free Zone Authority (DAFZA), all the licensees in the DAFZA have to file the Economic Substance Notification on or before 3rd May 2020. However, this due date initially declared is now extended to 31st May 2020.
If any licensee fails to comply with the requirement of filing the Economic Substance Notification in DAFZA, then such a Licensee may have to face Penal Consequences as provided in Article 11 of the Cabinet Resolution No. 31 of 2019 Economic Substance Regulation. The penalty ranges from AED 10,000 to AED 50,000 in the first year of its Non-Compliance and for Subsequent non-compliance, it ranges from AED 50,000 to AED 300,000.
Economic Substance Regulations vide Cabinet of Ministers Resolution No 31 of 2019 is effective in the UAE from the year 2019. This Regulation is applicable to all companies registered in the UAE onshore & Free Zone (including Financial Free Zone), which are conducting relevant activity in the UAE. The businesses in the UAE will now have to prove their Economic and Substantial existence in the UAE and have to apply the substance over form approach to such a review. As per Article 8 of this regulation the Licensees need to file Economic Substance Notification and Economic Substance Return with its Regulatory Authority within the declared due dates.
Please note this Regulation is not applicable to all businesses in the UAE. It is applicable to those licensees carrying out Relevant Activity.
As per Cabinet Resolution No. 31 of 2019, Relevant Activity means following:
So, the entities must notify the Authority whether or not they carry out any of the above mentioned Relevant Activity. Whether the licensee carries out the Relevant Activity or not needs to be assessed by licensee itself. Regulatory Authority; DAFZA is not responsible to do any assessment with regard to this. Further, it is to be noted that if the Licensee is carrying out the activities which is not mentioned in the license issued by DAFZA but in substance falls in the category of Relevant Activity, the licensee will have to notify the Authority that it is carrying out the Relevant Activity.
The regulation will be applicable even if there is no Revenue earned or Income booked for the reportable period but the Licensee had carried out the Relevant Activity. The Licensee with Branch Office, Sales & Marketing offices, etc. with Parent Company or head office situated out of the UAE would require to assess whether they carry out any of the Relevant Activity.
As provided in the circular issued by DAFZA, All licensees are required to file an annual notification as to whether or not they are conducting any Relevant Activities. The notification will indicate:
We Emirates Chartered Accountants Group have a specialized team on the Subject to support and guide you on the Compliance with Economic Substance Regulation with the following roadmap:
To study your Business Activities in detail and assess the applicability of the Economic Substance Regulation on your activities. Also, to provide support and guidance on filing a notification with the Relevant Authority.
To provide the guidance and support for compliance with the provisions of the Economic Substance Regulation, if your activity is falling under the regulation. To conduct Impact Study and Gap Analysis in order to assess whether the Business meets the Compliance test and to provide the recommendations.
Reporting with Regulatory Authority on or before the Due Date. We are Quality driven professionals and its always our pleasure to serve & support you.
CA. Manu Palerichal
Mobile:+971 50 282 8727
CA. Dhara Yagnik
Mobile: +971 56 595 6836