In order to meet International standards of reporting, there are various compliances and reporting requirements introduced by the UAE Authorities to ensure transparency and smooth working of the businesses in UAE. The compliance requirements are to be followed to avoid hefty penalties.
Compliances include:
- Economic Substance Regulations (ESR)
- Excise Tax
- Anti-Money Laundering (AML)
- Ultimate Beneficial Owner
Benefits of Other Compliances
- Updates over changing tax regulations
- Mitigating the risk of double taxation
- Detect and prevent fraud
- Becoming legitimate
- Helping with implications and impact
- On-time and accurate tax filings
Economic Substance Regulations (ESR)
A business that conducts relevant activity must submit a notification, 6 months post the financial year end and an Economic Substance Report 12 months post the financial year-end. Entities need to report compliance with the regulations, and where they are unable to demonstrate economic substance, they would be subject to penalties and therefore, would need to evaluate the need to fulfill…
substance requirements, and/or consider restructuring of operations.
ESR applies to business forms registered in the UAE that carry out any of the following relevant activities:
- Banking Businesses
- Insurance Businesses
- Investment Fund Management Businesses
- Lease-Finance Businesses
- Headquarters Businesses
- Shipping Businesses
- Holding Company Businesses
- Intellectual Property Businesses
- Distribution and Service Centre Businesses
Excise Tax
The Excise Tax function involves evaluating implications of Excise Tax on the business operations including ascertaining whether the product is subject to Excise Tax, impact on valuation for levy of tax, ascertaining the rate of tax, etc.
Compliances for Excise Tax include Excise Tax registrations, undertaking periodic compliances, conducting excise training, assisting in the filing of Excise Tax declarations, assisting in the filing of clarification, etc.
Under the UAE Excise Tax Law, registering for Excise Tax is the responsibility of any business engaged in:
- The import of excise goods into the UAE
- The production of excise goods where they are released for consumption in the UAE
- The stockpiling of excise goods in the UAE in certain cases
- Anyone who is responsible for overseeing an excise warehouse or designated zone i.e. a warehouse keeper.
Anti-Money Laundering (AML)
Anti-Money Laundering Law refers to the policies and legislation that compel entities to monitor their clients to prevent money laundering. A crucial component of the actions financial institutions must take to safeguard their business operations and foster confidence with their clients and partners in the implementation of money laundering prevention programs.
Businesses conducting the following activities must register with the goAML system and report suspicious transactions on this system: – Brokers and Real Estate Agents – Dealers in Precious Metals and Precious Stones – Independent Accountants – Providers of Corporate Services Proper Documentation of AML Policy, controls, and procedures, AML Training, AML/CFT Health Check, Business Risk Assessment, and Preparation of annual AML/CFT Risk Assessment Report are part of AML compliance requirements.
Ultimate Beneficial Owner (UBO):
All companies registered in the UAE, including the free zones, are subject to the registration procedures with the Beneficial Owner data. The Law requires the entities in UAE to disclose their Ultimate Beneficial Owners, which intends The Ultimate Beneficial Owner is defined as:
FAQ
What are entities subject to ESR required to do?
Entities subject to ESR Regulations must:
- File and submit an annual notification within six months from the end of the relevant financial period
- File and submit an Economic Substance Report within 12 months from the end of the relevant financial period
- Meet Economic Substance Test through which they must demonstrate that the licensee and relevant activity are being directed and managed in UAE, the relevant Core Income Generating Activities (CIGAs) are being conducted in UAE, and the licensee has enough people, expenditure, and premises in UAE
Is there any minimum or maximum relevant income generated from the relevant activity under ESR Regulations?
There is no defined amount of relevant income or range. The FTA will assess the documents and proofs submitted rationally based on the type of activity, size of the entity, and economic scenario. It will recognize the fluctuations in the income of any entity in any financial period and from one period to another.
What goods are charged for Excise Tax?
a) Carbonated drinks (50%)
Examples include Pepsi, Fanta, etc. Concentrations, powder, gel, the only exception being flavored water.
b) Tobacco products (100%)
c) Energy drinks (100%)
These are drinks marketed as having physical and mental enhancement and include stimulants that increase alertness. For example, caffeine, taurine, ginseng, and guarana.
No minimum annual income is required for the Excise Tax.
What are the AML reporting requirements in the UAE?
Standardize and streamline all reporting requirements and ensure that the UAE is aligned with the Anti-Money Laundering and Combatting of Terrorist Financing AML/CTF standards of the Financial Action Task Force (FATF). Entities are required to retain all records and documents pertaining to STRs (Suspicious Transaction Report) and the results of all analysis performed.
Should the Beneficial Owner own shares in the license or contribute to the capital?
It is not necessary for the Beneficial Owner to own shares in the company or contribute to the capital, as he/she can be the natural person who occupies a senior management position (controlling the company’s decisions) in the event that the Beneficial Owner cannot be determined as required.
How do I contact Fincirc International Management?
Office 1209, 12 th Floor, The Regal Tower, Business Bay, Dubai, UAE
Email: [email protected]