offence-penalties-esr-uae

offences and penalties for non compliance of ESR in UAE

Offences and Penalties where the Economic Substance Test is not met under Economic Substance Regulation in UAE

  1. An amount of administrative penalty of not less than dirhams ten thousand (AED 10,000) and not exceeding dirhams fifty thousand (AED 50,000) shall be imposed for failure to meet the Economic Substance Test.
  2. If the Regulatory Authority determines under Article 7 of this Resolution that a Licensee has failed to meet the Economic Substance Test for a Financial Year, the Regulatory Authority must issue a notice to the Licensee notifying it of the following:
    1. that the Regulatory Authority has determined that the Licensee does not meet the Economic Substance Test for the said Financial Year.
    2. the reasons for that determination.
    3. the amount of administrative penalty imposed on the Licensee under Clause 1 of this Article.
    4. the date upon which the administrative penalty under Clause 1 of this Article is due, being not less than thirty (30) Business Days after the issue of the notice.
    5. what action(s) the Regulatory Authority considers should be taken by the Licensee to meet the economic substance test.
    6. the Licensee’s right of appeal under Article 13 of this Resolution.
  3. An amount of administrative penalty of not less than dirhams fifty thousand (AED 50,000) and not exceeding dirhams three hundred thousand (AED 300,000) shall be imposed for failure to meet the Economic Substance Test if the Regulatory Authority has determined that, for the Financial year following a Financial Year in which a notice was issued under Clause 2 of this Article, (Further Financial Year), the Licensee has failed to meet the Economic Substance Test pursuant to Article 7 of this Resolution, the Regulatory Authority must issue a further notice to the Licensee notifying it of the following:
    1. that the Regulatory Authority has determined that the Licensee does not meet the Economic Substance Test for the Further Financial Year.
    2. the reasons for the determination.
    3. the amount of the administrative penalty imposed on the Licensee under Clause 3 of this Article;
    4. the date from which the administrative penalty under Clause 3 of this Article is due, being not less than thirty (30) Business Days after the issue of the notice.
    5. what action the Regulatory Authority considers should be taken by the Licensee to meet the Economic Substance Test.
    6. the Licensee’s right of appeal under Article 13 of this Resolution.
    7. any other administrative action the Regulatory Authority may impose, including the suspension, revocation or non-renewal of the Licence of a Licensee.

Offenses and Penalties for failure to provide information or for inaccurate information

 Failure to Notify: AED 10k to 50k

Failure to provide accurate or complete information:

  • Penalty of AED 10k to 50k; and
  • Deemed failure to demonstrate economic substance in the UAE Failure to demonstrate sufficient economic substance in the UAE for the relevant Financial Year:

First failure

  • Penalty of AED 10k to 50k; and
  • Information exchange with foreign competent authority of:

(1) parent company,

(2) ultimate parent company, and

(3) ultimate beneficial owner.

Second consecutive instance of failure

  • Information exchange with foreign competent authority of:

(1) parent company,

(2) ultimate parent company, and

(3) ultimate beneficial owner; and

  • Penalty of AED 100k to 300k; and
  • Trade / commercial licence could be: suspended, withdrawn or not renewed.

For more details and a free consultation
callus : +971 4 269 9329 / +971 50986 6466 or mail us: info@spectrumaccounts.com

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