The Federal Tax Authority (“the FTA”) was constituted as the National Assessing Authority with the issuing of the new Cabinet Resolution No. 57 of 2020 concerning Economic Substance Regulations (“Regulations”) on 10 August 2020.

The FTA’s responsibilities include, but are not limited to: 

  1. Conducting assessments to establish whether a Licensee has fulfilled the Economic Substance Test; 
  2. Implementing administrative fines when appropriate; and
  3. Hearing and ruling on appeals.

Furthermore, FTA has published the Economic Substance Regulations Appeal User Guide (“the Guide”), explaining how and when to appeal judgments of Economic Substance Regulations administrative fines imposed on Licensees or Exempted Licensees. 

Penalty for failure to submit Economic Substance Report

The FTA has imposed a penalty of AED 20,000 on a licensee who fails to submit the notification and an amount of AED 50,000 on a licensee who fails to submit the economic substance report following the Cabinet of Ministers Resolution 57 of 2020 concerning the Economic Substance Requirements (Decision). The FTA now has the authority to impose further fines on licensees due to the decision.

Economic Substance Regulations Appeal user-guide: An overview

The user guide has been designed to help Licensees submit an appeal request to the Federal Tax Authority (National Assessment Authority) about Administrative Penalties imposed under Economic Substance Regulations. This handbook will also aid Licensees with the following:

  • How to File an Appeal
  • How to Provide Supporting Documents
  • Common Errors When Filing an Appeal
  • Penalty schedule based on Cabinet Resolution No. 57 of 2020Timetable for filing an appeal

This user guide is intended for use by anybody who wishes to apply with the National Assessment Authority to appeal against judgments of Economic Substance Regulations administrative fines imposed on the Licensee or exempted Licensee.

The Purpose of the Appeal

The appeal request is one of the services offered following Article 17 of Cabinet of Ministers Resolution No. 57 of 2020 on Economic Substance Requirements. The Licensee or exempted Licensee, on the other hand, has the right to dispute the National Assessment Authority’s decision to impose an administrative penalty on him for any of the following reasons:

  • It did not commit the violation charged against it;
  • The administrative punishment levied is excessive in comparison to the violation;
  • The administrative penalty levied is more than the limit set out in this section.

Obtain a Waiver of Penalties by filing an appeal

  • The first step for UAE companies is to ascertain whether or not they are subject to ESR reporting requirements. Any developments in the business during the previous fiscal year must be taken into account.
  • To avoid severe fines for non-compliance, such organizations must complete and submit the required ESR documents on time. Entities may hire ESR experts in the UAE to help them with self-assessment and submission of ESR notifications, saving them money in the long run. 
  • It is advisable to file an appeal if a penalty is imposed due to any of the conditions described above. 
  • On the ESR portal dashboard, there is an Appeal tab. If the National Assessing Authority judges that the situation is legitimate, the penalty may be waived.
  • However, it would be best to double-check that you’ve included all of the required supporting documents and a clear explanation to file an appeal against ESR fines. Contact the top ESR consultants in Dubai.

Providing supporting documentation when the National Assessing Authority requests them

  • The National Assessing Authority may seek further information or documents from the Licensee, and the application must respond within (5) five working days of receiving such a request. 
  • If the information/paperwork is not given, the national evaluating authority has the power to reject the appeal. 
  • After obtaining the additional supporting papers, the National Assessing Authority will assess the appeal request and decide within (40) forty working days after receiving the requisite documents. The applicant will be notified within (5) five working days of the judgment’s issuing.

Penalty and Time frame

  • The FTA may impose the following penalties in addition to disclosing information with foreign authorities:
  • AED 20,000 if the ESR Notification is not filed within six months of the financial year’s end.
  • AED 50,000 if the ES Report is not filed within 12 months at the end of the financial year.
  • Failure to pass the Economic Substance Test can result in a fine of AED 50,000.
  • During the next financial year, repeatedly committed one of the two offences listed in points 2 and/or 3 – AED 400,000

To avoid administrative fines resulting from the non-submission of ESR Reports, organizations operating in the UAE must conduct an ESR assessment with the help of top ESR consultants in Dubai. Most businesses do their assessments, which results in mistakes and hefty fines. However, in the case of penalties, the National Assessing Authority permits enterprises to seek an appeal. Consult with a leading ESR consultants in Dubai, and they may have been able to assist enterprises in avoiding assessment mistakes and avoiding form fines. highly competent auditors and company setup experts that are well-versed with ESR regulations. Don’t hesitate to contact if you need any assistance on ESR.

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