Offenses and penalties for failure to submit an Economic Substance Report

The Economic Substance Regulations (ESR) were put in place by the UAE government to curb unfair commercial exercises. ESR in UAE is a set of guidelines that correlate to specific types of businesses. ESR's main goal is to promote economic growth while regulating and overseeing all free zone and onshore legal entities' operations. The law has also been adopted to make sure that the relevant associations follow the appropriate tax laws.

Companies engaging in relevant operations must submit an annual report to the government as one of the main ordinances of ESR. Corporations that violate the requirements of the ESR law in the United Arab Emirates will be subject to severe fines from the National Assessment Authority which is the Federal Tax Authority in this case. Businesses must comprehend how Economic Substance regulations apply to avoid fines and continue to comply.

Penalties for Failure to Submit an ESR Report

It is conceivable for licensees to miss the deadline for submitting an ESR report in the same way they miss the deadline for submitting an ESR notification. If the licensee fails to comply with the UAE's ESR reporting requirements, a fine of fifty thousand dirhams (50,000 AED) is applied. First of all, licensees are unaware of report submission deadlines. The report must be turned in twelve months before the year's end. The licensees can mistakenly believe that the deadline for submitting reports coincides with the year's conclusion, subjecting them to punishment. It is not just the compliance of an ESR report that is required; in light of the Resolution, failure to defer the required documents or data with the ESR report will arise the same penalty.

According to Article 14 of Cabinet Resolution No. 57, if the company violates the same law in the financial year that immediately follows the financial year in which the breach was first committed, an administrative fine of 400,000 dirhams will be levied. It is better to get the guidance of the top ESR experts in UAE because repeating the infractions results in greater financial damage in the form of sanctions.

ESR Penalties can be imposed for even a single misstep, and they get worse the more times they happen. Depending on how the ESR in the United Arab Emirates is interpreted, appeals can be a great way for licensees to gain more insight into ambiguous areas. Businesses must take foresighted measures to achieve compliance and stop further non-compliance.

It is important to note that only licensees are required to submit the ESR report and not the exempted licensees. The exempted licensees are only required to submit the notification, whereas the requirement of report submitting is only for the licensees. Furthermore, both notification and reporting submission is important for licensees. If they submit one and miss the other, they will definitely face penalties. Penalties for not submitting a report are higher than that of notification non-submission in the UAE ESR regulations.

Is there a time limit on when someone can get a penalty email?

Yes, the following appropriate standards exist;

• The FTA has 6 years from the date of the offense to decide the case and penalize the licensee if an ESR notification or ESR report is not submitted.
• The FTA has a year to decide the matter and issue the final erroneous information provided.
• If the case meets the criteria for fraud, these deadlines are not applicable, and UAE law will now dictate a new course of action.

Is there a deadline for submitting penalties?

When a licensee or exempted licensee violates ESR laws, an ESR penalty email will be sent to that particular entity along with a final date for penalty submission. The total amount is also mentioned in the email. The ESR Guidance does not specify a specific deadline, and the National Assessing Authority(NAA) determines the due date. The due date, however, will not be any earlier than the thirty days following the penalty notification.

ESR Consultants in UAE

Businesses often face the trouble of non-compliance because they are not fully familiar with the core areas of Economic Substance Regulations. Moreover, there might be a drawback to supervision steps, the absence of which greatly affects compliance with the laws of ESR. To avoid all that chaos, you can avail of our services of ESR consultants in UAE. ESR experts not only provide you with financial services but also monitor ESR requirements and give genuine advice. You can also go for an appeal against imposed penalties that are inappropriate. Here, you must need the supporting hands of ESR advisors who can handle it effectively. Thus, choose qualified service providers if you wish to conduct your business successfully and in compliance with the Economic Substance Regulations. In this way, you can put yourself on the safe side and avoid receiving such penalty emails from the Federal Tax Authority. 

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