What is Economic Substance Regulation for RAKEZ in UAE?
Ras Al Khaimah Economic Zone (RAKEZ) is an approved Regulatory Authority for Economic Substance Regulation in UAE. RAKEZ serves more than 13,000 clients and is also planning to take in more clients in the future. It aims to provide high-quality and cost-effective services to all the businesses in the free zone.
Economic Substance Notification is a requirement to be filed by all the licensees performing Relevant Activity in UAE as per the jurisdiction. RAKEZ Regulatory Authority oversees the enactments of law and not answerable for guiding an examination on the applicability of Economic Substance Regulations in the UAE.
Relevant activity includes the Banking Business, Insurance Business, Investment Fund Management Business, Lease-Finance Business, Holding Company, Headquartered Business, Shipping Business, Intellectual Property Business, and Distribution & Service Centre Business.
What is to be notified to RAKEZ?
Companies that come under the jurisdiction of Economic Substance Regulations UAE should file the Economic Substance Notification with RAKEZ that includes the following:-
- Mention Financial year-end;
- Handles a Relevant Activity or not;
- Earned any income from the Relevant Activity or not;
- Earnings by the Relevant Activity totally or partially subjected to a tax outside of the UAE or not; and
- Exempt due to Government control or not.
What is Exempt Category in RAKEZ?
A Licensee in RAKEZ is exempted from Economic Substance Regulations UAE if at least 51% of the share capital of the Licensee is directly or indirectly owned by – the UAE Federal Government, the Government of any Emirate, any governmental authority, the body of the UAE Federal, or an Emirate Government during the Reportable Period.
What if the licensee does not fall in Exempt Category and also conducts the Relevant Activity in RAKEZ?
For Licensee who are not exempt from ESR and conducts the Relevant Activity in the Reporting Period and also earns Income will have to Comply with the following:
- Adhere to the Substance Requirements as rendered in Economic Substance Regulations UAE (ESR UAE).
- To tender the Economic Substance Return (ESR return) with RAKEZ properly within the Due date.
What is the punishment for Non-compliance with Economic Substance Regulations in UAE?
If any licensee overlooks to comply with the duty of listing the Economic Substance Notification, then such Licensee may have to undergo disciplinary consequences. The penalty ranges from AED 10,000 to AED 50,000 in the first year of its Non-Compliance, and for following non-compliance; it ranges from AED 50,000 to AED 300,000. Moreover, oversight by an entity to comply with Statute can also result in the spontaneous transfer of Data with Foreign Competent Authority, possible termination, and non-renewal of registration.
How can Accounting firms help Economic Substance Regulations in UAE?
Accounting firms have a distinguished section for ESR to support and supervise the Agreement with Economic Substance Regulations in UAE with Quality-driven specialists who regularly aspire to aid & assist businesses. They support overcoming the matters of applicability with this law and aid with Economic Substance Notification.