Go for Appeal if Penalty on (Economic Substance Report)ESR is Raised.

Go for an appeal if the penalty on ESR is raised.

Did you successfully submit the Economic Substance Notification & Economic Substance Report of your company to the Ministry of Finance?

Did you get any response from the authority is after that? 

Many licensees in the UAE have come across penalty emails from the Ministry of Finance.

Did you get any such penalty email?

If yes, do you know how to resolve the issues? In order to resolve such issues, we should know exactly the reason for receiving such a penalty ticket from the Authority. We have listed down some of the reasons why you might have received penalty emails:

Situations where you may get Penalty emails from the Ministry of Finance (MoF)

    SITUATION 1:

ABC LLC filed the Economic Substance Notification disclosing, it conducted a specific Relevant Activity. But later noticed that the company did not conduct any Relevant Activity.

Hence an Economic Substance Notification Amendment request was made. ABC LLC did not submit the Economic Substance Report, knowing that there was no Relevant Activity during the period.

But by the time the approval for Amendment on Economic Substance Notification becomes active, the Economic Substance Report Tab is generated. Hence, Penalty for non-submission of Economic Substance Report before the deadline might be activated on the Dashboard. 
Note:

In certain cases, the authority itself ask for Re-submission of Notification due to different reasons. In such cases also if the Economic Substance Report tab is already generated and if you did not actually conduct Relevant Activity during the previous period, the penalty will raise, for non-submission of Economic Substance Report.   

 SITUATION 2:

There could be a scenario where two Economic Substance Report Tabs are generated in the portal. It may happen if changes are made in Relevant Activity in the Economic Substance Notification.

For Example, ABC LLC submitted notification with Relevant Activity as Headquartered Business & Distribution & Service Centre Business. Later ABC LLC realized it will result in duplication of activities and hence requested amendment in Notification.

In amended Notification, ABC LLC only notified Relevant Activity as Distribution & Service Centre. By the time amended notification submitted, the ESR report tab is activated on the dashboard for 1st filed ESR notification with 2 Relevant Activity (Headquartered Business & Distribution & Service Centre Business) and another ESR report tab got activated for amended Notification with Relevant Activity as only Distribution & Service Centre.

In such a Scenario, ABC LLC filed the 2nd Report with Distribution & Service Centre as Relevant Activity and no action against 1st generated Report. Penalty for non-submission of Economic Substance Report before the deadline might be activated on the Dashboard. 

SITUATION 3:

Initially the Economic Substance Notification is submitted declaring a Specific Relevant Activity. Later the Economic Substance Exemption was claimed in the Economic Substance Notification, by then the Economic Substance Report tab was activated.

In this case, the company need not submit the Economic Substance Report. But the approval for Amendment on Economic Substance Notification might have taken the time and by then the Economic Substance Report Tab becomes active.

Economic Substance Report was not filed since Exemption (along with supporting evidence) was filed. Still, the penalty ticket may raise.

How to waive off the penalties generated from situations like above?

In the above-given scenarios, the Licensee or Exempted Licensee will have the option to Appeal. Appeal Tab is available on the Ministry of Finance (MoF) portal dashboard. It is important that all supporting evidence along with a detailed explanation is necessary for Appeal. 

As we all know Economic Substance Regulation Compliance includes Economic Substance Notification & Economic Substance Reporting. As per the Economic Substance Regulation the due date for Economic Substance Notification and Economic Substance Report filing are as below:

Article 13 & 14 of the Economic Substance Regulation provides the offences & penalties for failure to provide Notification and Report, respectively.  The administrative penalty will be levied on that Licensee or Exempted Licensee who fails to submit Notification & Report (wherever applicable) as below:
Failure to submit    Penalty Amount

If there is a delay in submitting Economic Substance Notification or Economic Substance Reports, and if such delay is because of the ignorance of the Law, the chance of getting approval for waiving off the penalty cannot be assured through an appeal.

But there are genuine cases as mentioned at the beginning of this article, where the penalty can be appealed and removed. We are happy to resolve your issues by submitting the Appeal to the Authority.

Please get in touch with us for any advisory support & guidance in this regard.

Mr.Sachin Harisankar

+971502465850
+9714 2500290
sachin@emiratesca.com