How can UAE businesses ensure compliance with ESR and UBO regulations?

The constant monitoring of financial health is paramount for UAE companies to stay on top of business. Regularly scrutinising financial health is not only a sound business practice, but it also provides reassurance to stakeholders. Getting the books of accounts audited by certified audit firms in Dubai is one way of achieving this.

The relevance of conducting annual audits has become more critical in the wake of increased regulatory compliances such as Ultimate Beneficial Ownership (UBO), Economic Substance Regulations (ESR), Anti-Money Laundering (AML) and VAT. It’s not easy for businesses to navigate the pressures of regulatory compliance along with ensuring the credibility of financial statements.

Here’s how audit firms can ensure transparency and regulatory compliance in your business:

AML compliance

The UAE has been cracking down on companies that flout AML laws with increased scrutiny and stricter penalties. In October 2020, 200 law firms got their licences suspended and were penalised for not complying with AML requirements. A month before the incident, nine companies and nine individuals were sentenced to fines and prison terms for transferring funds to multiple fictitious companies to hide illegal activities in oil trading. Such hefty punishments have necessitated the need for increased due-diligence and KYC requirements. Experienced audit companies in Dubai provide training and consultation on how to comply with AML standards, which helps businesses avoid stringent punishments.

ESR consultation

Mainland, freezone and offshore companies that conduct ESR relevant activities are required to file annual ESR notification and an ESR report to the national assessing authority, which is the Federal Tax Authority (FTA) in the UAE. Companies also need to meet the requirements of the economic substance test if they are generating income from the relevant activities.

Companies that fail to submit the annual notifications, or any other mandatory documents/ information will have to pay a penalty of Dhs20,000, while filing inaccurate information on the notification or ESR return will lead to an administrative fine of Dhs50,000.

Companies will also face a penalty of Dhs50,000 if they do not file economic substance returns or fail to meet the economic substance test.

Audit firms in Dubai can support companies with efficient consultation on filing ESR notification and reports, ensuring they avoid fines associated with ESR non-compliance.

Navigating VAT requirements

The UAE is generally known as a tax-free business destination, although businesses do fall under the ambit of value added tax (VAT). Businesses whose taxable supplies exceed the mandatory threshold of Dhs375,000 must register for VAT. Companies can also apply for voluntary VAT registration provided their supplies are below the mandatory registration threshold but exceed the voluntary registration threshold of Dhs187,500. Apart from registration, businesses need to comply with requirements such as VAT return filing, maintaining records, VAT de-registration and VAT reconsideration. Audit firms can provide tax consultation services to protect taxable businesses from the consequences of non-compliance.

Streamline your business

The business landscape in the UAE is undergoing a change in tandem with the constant evolution of the market and technology. However, the auditing process remains integral to build investors’ confidence in any business as well as to improve trust in the financial system.

Reports compiled by auditors in Dubai establish a higher degree of transparency on the company’s financial statements. The government, licencing authorities, banks, shareholders and investors give utmost importance to audited financial statements while gauging the financial health of the companies. Many freezone authorities in Dubai also have a mandatory requirement of submission of audited financial statements for companies to renew their trade licence.

Jitendra Chartered Accountants (JCA) takes a holistic approach to a company’s audit and compliance requirements with a deep understanding of its business. One of the most experienced audit firms in Dubai, JCA assists companies to navigate successfully through latest regulatory standards including VAT, AML, ESR and UBO.