ESR Review & Consistency Advice – UAE & Bahrain

Economic Substance Regulations (ESR) is applicable in the UAE and Bahrain in response to OECD’s BEPS Action 5 initiative to counter harmful tax practices. It is to ensure that businesses are engaged in genuine ‘Relevant Activities’ with offices, full time staff, operating expenditures, etc. Accurate and full disclosure of such evidence is required for businesses to stay ESR compliant. Here, the interaction of ESR with other tax elements, especially within the OECD’s BEPS framework, is significant. The disclosed ESR information must be reviewed in light of other tax and legal disclosures to ensure there are no mismatches. Consistency is critical as the information is reviewed by the same ministries, tax authorities and other relevant government bodies that have access to the other filings such as VAT, CbCR, TP, etc.; the fact that this is an issue on the international radar only amplifies the criticality.

At MBG Corporate Services, our experienced and knowledgeable team of ESR experts can guide you through the process with:

• Gap assessment with other compliances
• Risk analysis and advice on alignment of CbCR filings, where applicable, with ESR
• Advice on Consistency of Transfer Pricing – Related party transactions, (wherever applicable in the MNE Group) with ESR
• Advice on developing a better operating/ business model or Transfer Pricing policy well aligned with substance and arm’s length requirements
• Advice on alignment of TRC/ Treaty benefit with ESR
• Advice on Consistency of ESR to prove substance: Vs. Vat/Free Zone filings and audited financials