Deadline approaching for UAE economic substance notifications

The UAE introduced economic substance regulations (ESRs) in April 2019. Under the rules, 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.

Corporate law expert Mohammad Tbaishat of Pinsent Masons, the law firm behind Out-Law, said different regulators were imposing different requirements on firms.

“Although the regulations state that only entities carrying out ‘relevant activities’ need to notify the relevant regulator, some regulators are requiring all licensees to notify whether or not they conduct relevant activities. Businesses are advised to seek legal advice if they're unsure whether or not they conduct relevant activities and fall within the economic substance regulations,” Tbaishat said.

Regulators requiring all member firms to make a notification include the Dubai International Finance Centre, Abu Dhabi Global Markets, the Dubai Multi Commodities Centre, and the Umm Al Quwain Free Trade Zone.

The Dubai Development Authority only requires a notification from entities conducting one or more ‘relevant activities’, but has set an early deadline of 25 June.

In April the UAE government confirmed that the notification deadline to the Ministry of Finance was 30 June. A number of regulators across the emirates had imposed a 31 March deadline but subsequently relaxed this. 

Firms which fail to notify the regulator they are carrying on a ‘relevant activity’ could face a fine of up to AED50,000 (£11,000).