UAE Economic Substance Regulations (ESR) Return – the contents of the ESR return Form
As many companies in UAE already submitted ESR Notification and most of them are conducting either one or some of the relevant activities and earning income by conducting those relevant activities, submission of ESR Return is going to be mandatory for them to submit before the end of the financial year.
Though ESR Form was not released by the Ministry of Finance (Competent Authority) yet, based on ESR Law, we can understand the contents that are going to be part of the ESR Return. The companies may not have enough time to submit the return after the release of the ESR return template by the Competent Authority whenever it happens.
It is always better to be ready with the required information beforehand than wait for the template to be released and rush in the last minute looking for information. Hence, we tried to mobilize the relevant information from the Law in regards to the return and presenting here for your reference to have a basic idea of what is going to be in place.
Keep in mind that, the information provided below is presented only as a reference guide with a likelihood of expected questions in the content form. We will share the ESR Return form whenever it is released officially.
The Competent Authority shall include the following information as part of the ESR Return:
(a) Relevant Activity: the type of Relevant Activity conducted by it, it shall be in line with ESR Notification that has been filed with the regulatory authority (the licensing authority)
(b) Income from the relevant activity: the amount and type of relevant income in respect of the Relevant Activity. This could be identified from segment reporting in financial statements if it is a significant amount.
(c) Operating expenses: the amount and type of operating expenses in respect of the Relevant Activity.
(d) Assets: the amount and type of assets in respect of the Relevant Activity. One should be able to identify the specific assets that are used for or assigned to the specific relevant activity.
(e) Location of the business: the location of the place of business and, if applicable, plant, property or equipment used for the Relevant Activity of the Licensee in the State.
(f) Employees and skill set: the number of full-time employees with qualifications and the number of personnel who are responsible for carrying on the Licensee’s Relevant Activity.
(g) State Core Income-Generating Activity: information showing the State Core Income-Generating Activity in respect of the Relevant Activity that has been conducted.
(h) Declaration: a declaration as to whether or not the Licensee satisfies the Economic Substance Test.
(i) If the Relevant Activity is outsourced: where a Relevant Activity is outsourced by a Licensee, the Licensee must demonstrate the following:
- i). the Relevant Activity that is outsourced is a Core Income-Generating Activity being carried out in the State.
- ii). the Licensee has adequate supervision of the Relevant Activity outsourced.
- iii). the Licensee shall submit to the Regulatory Authority a report containing information in relation to the level of resources employed by the third-party service provider to which the Relevant Activity is being outsourced, demonstrating that the service provider’s activities, employees, operating expenditures and premises in the State are adequate in relation to the level of Relevant Activity outsourced.
(j) Additional information, documents, and records: A Licensee shall provide the Regulatory Authority with any such additional information, documents, or other records as shall be reasonably required by the Regulatory Authority to make an assessment of whether the Economic Substance Test is met.
Declaration with respect to High risk IP: in the case of a Relevant Activity being an Intellectual Property Business, a declaration as to whether or not it is a high risk intellectual property business. If the Licensee declares that it is a high risk intellectual property business, the Licensee shall provide the information mentioned below to refute as any Licensee who conducts High Risk IP activity is by default considered as Economic Substance Test is not being met during a Financial Year.
The Licensee that is carrying on a high risk intellectual property business the following additional information must be provided:
- i). Information demonstrating that the Licensee does and historically has exercised a high degree of control over the development, exploitation, maintenance, enhancement and protection of the intellectual property asset by an adequate number of full-time employees, with the necessary qualifications, who permanently reside and perform their activities in the State.
- ii). business plan showing the reasons for holding the ownership in the Intellectual Property Asset in the State.
- iii). employee information, including the level of experience, type of contracts, qualifications and duration of employment with the Licensee.
- iv). evidence that decision making is taking place within the State.