Have you received the Penalty Email from Federal Tax Authority for non-compliance with Economic Substance Regulation in the UAE? Well in this article we will discuss the reasons penalties are levied and possible steps to resolve them.
Before we discuss the reasons why you might have received the penalty, we would bring to your notice the important due date in the ESR. Delay in submission is one of major non-compliance.
ESR Notification: to be filed (by licensee & exempted licensee conducting relevant activity) within 6 months from the end of Financial Year.
ESR Report: to be filed (by licensee earning income from relevant activity) within 12 months from the end of the Financial Year.
It is very important to assess the activities undertaken by your business during the reporting period. The applicability of ESR will solely depend on the activities undertaken by your business. Incorrect assessment may lead to monetary & non-monetary penal consequences.
If you are penalized what should be the next course of action. Licensees are given the option to appeal against the penalty and provide clarity to the authority.
For e.g., Notification was due in Jun’21. However, since for FY 2019 the submission was done in Dec’2020 (which was extended due date), you followed the same FY 2020 (which means you filed notification in Dec’21). This can be appealed since the entity is not conducting Relevant activity as per ESR and it is not required to file the notification.
Let us know in case there are any other instances where the entity is penalized, and you are citing our support on conducting ESR applicability assessment on your business activities or looking for support on submission of the appeal to FTA. You may get in touch with our subject expert:
CA Dhara Yagnik