Economic Substance Regulations issued by UAE helps it get removed from EU's blacklisted countries

EditorEditor    31 October 2019
Economic Substance Regulations issued by UAE helps it get removed from EU's blacklisted countries

Recently, the EU removed UAE from the blacklisted countries that are considered non-transparent from a tax perspective. This removal is purely on the basis that the UAE on April 30, 2019 introduced the Economic Substance Regulations (ESR) that mandates some selected industries/sectors to ensure they have sufficient economic activities in the country. The introduction of this legislation was later backed up with detailed guidelines leading the EU to believe that the UAE is on the path of ensuring tax transparency.

Considering that the companies have end of 2020 to report their ESR status, the assessment needs to be done in the next three months. That’s because the report on economic substance for FY 2019 has to be filed on or before 31 December 2020. The sectors that include banking, insurance, holding companies, distribution and service centres etc have to assess and report that they have sufficient activities in the country by way of no. of people, conducting board meetings, level of activities carried out from UAE etc.

Although the legislation provides for harsh penalties for non-compliance, it is to be seen how stringently the UAE authorities implement it. 

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