Some authorities across the emirates had imposed earlier deadlines, with an earlier deadline of 31 March 2020 set by the Dubai International Finance Centre (DIFC), for example. However, the Khaleej Times has reported that the DIFC, along with the Abu Dhabi Global Markets (ADGM) and Ajman Free Zone, have now relaxed their earlier deadlines.
According to the Khaleej Times report, Younis Haji Al Khouri, undersecretary at the Ministry of Finance, said: "The cut-off date of the notification to the Ministry of Finance is 30 June 2020 and that's what was communicated to all regulators. To assure the compliance, some regulators decided to cut it short."
ESRs have been introduced across the globe in countries with no or nominal corporate tax rates in order to comply with international initiatives to combat harmful tax practices.
ESRs were introduced in the UAE in April 2019. Introducing them has ensured that the UAE has been removed from an international blacklist of non-cooperative countries for tax purposes. In essence the new rules require certain legal entities established in those countries to demonstrate that they carry out substantial economic activities there.
Any entity licensed in the UAE to carry out a 'relevant activity' whether onshore or in a free zone and including in a financial free zone, is required to comply with the economic substance rules. The 'relevant activities' are: insurance; banking; lease financing; investment fund management; shipping; holding company; intellectual property; company headquarters, and distribution and service centres.
Businesses face financial penalties if they fail to comply with the ESRs in the UAE.
Businesses that are subject to the UAE's ESRs must file an ESR notification by the new deadline.