The UAE has CRS reporting but and no automatic or at the end of financial year. Therefore, bank only do provides CRS reports when it receives court order from the government official or financial institution from the client’s home country though bank holds all the rights for CRS reporting.
Economic Substance Regulation (ESR) Obligation
The Economic Substance Regulation (ESR) obligation is a regulatory framework established by various jurisdictions to ensure that companies conducting business activities within their jurisdiction have a substantial economic presence and conduct genuine business operations. This regulation aims to prevent profit shifting and tax evasion by multinational companies with offshore entities.
Under the ESR obligation, companies are required to meet specific economic substance requirements, such as having a physical presence, adequate employees, and incurring operational expenses in the jurisdiction where they conduct business activities. Failure to comply with these requirements may result in penalties and sanctions imposed by the regulatory authorities.
Economic Substance Regulation (ESR) Obligation
As being part of the UAE’s commitment and knowledge in OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation, the UAE issued Economic Substance Regulations which require UAE onshore and free zone companies and certain other businesses that carry out any designated relevant activities in the UAE to undertake an (“Economic Substance Test”).
Relevant Activities:
• Banking Business
• Insurance Business
• Investment Fund management Business
• Lease - Finance Business
• Headquarters Business
• Shipping Business
• Holding Company Business
• Intellectual property Business (“IP")
• Distribution and Service Centre Business
The ESR obligation is designed to promote transparency and fair taxation practices, as well as to discourage companies from engaging in artificial arrangements solely for the purpose of tax avoidance. Compliance with ESR obligations is crucial for companies to avoid legal and financial repercussions and maintain a good standing with regulatory authorities.