Do you think accuracy is everybody’s responsibility when it comes to providing information? Many countries have established measures to ensure that people comply with accuracy and don’t disregard its importance. One of those measures includes the ESR penalty, which penalizes any person who provides inaccurate or incomplete information in certain documents legally binding.
In this blog post, we are going to discuss what an ESR penalty is, why it exists, how much you can be charged for inaccuracy, and other important details related to these penalties that every citizen should know. Read on if you want more info about ESR penalties!
What is ESR penalty?
The Economic Substance Regulations (ESR) in the UAE require businesses to comply with certain criteria, such as demonstrating adequate economic activity, relevant expenditure, and proper recording of financial statements. If a business fails to meet the ESR criteria then it is liable for administrative penalties. Additionally, any person or company that fails to keep proper records or provide sufficient documentary evidence will incur a fine of 10% of its taxable income from the relevant period or AED 20,000 whichever is higher.
Furthermore, a penalty of AED 50,000 may be imposed for failure to submit an ESR return or filing inaccurate information. If the offence is repeated within two years, then the fine shall be doubled to AED 100,000. Businesses in the UAE that fail to comply with ESR regulations can face severe penalties such as fines and other administrative sanctions. Therefore, it is important to ensure compliance with all applicable laws and regulations. Failing to do so could result in financial losses and other serious consequences.
ESR penalties for providing inaccurate information
Under the UAE Economic Substance Regulations (ESR), companies are liable to administrative penalties for failing to file their ESR reports accurately and on time.
In accordance with Article 15 of the ESR, companies that provide false information or fail to comply with any other requirements, may be subject to an administrative fine of AED 50,000. In addition, Companies can incur a penalty of up to AED 10,000 per day for not filing their report within the prescribed time period.
Therefore, it is critical for companies to ensure that their ESR reports are accurate and filed on time in order to avoid potential penalties. Companies should also be aware of the applicable laws and regulations related to the ESR in order to comply with its requirements. Additionally, they should seek professional advice if they have any doubt or query regarding their filing obligations under the UAE ESR.
To sum up, it is important for companies operating in the UAE to take into account the associated risks of providing inaccurate information and failure to comply with the requirements of Economic Substance Regulations (ESR) as they may incur hefty administrative penalties including a fine up to AED 500,000 or criminal liabilities depending on individual circumstances. Therefore, companies should ensure that their ESR reports are accurate and filed on time to avoid any penalties.
The penalty notification’s contents
The UAE has imposed administrative penalties for failure to comply with the Economic Substance Regulation (ESR). These penalties are issued to violators in the form of an ESR Penalty Notification. The notification outlines multiple fines including a fine of AED 50,000 for submitting false information and failing to meet ESR requirements, a fine of AED 100 for providing inaccurate or incomplete information, and a fine of AED 400 for failure to file the ESR report.
Additionally, the UAE government reserves the right to publish details of violators in its official gazette. It is important for businesses operating in the UAE to ensure compliance with all provisions of the Economic Substance Regulation or risk facing these administrative penalties.
Furthermore, if the same amount of violation is repeated within a period of 12 months, the fine will be doubled up to AED 100,000. All fines must be paid before the notification’s deadline as failure to do so can result in additional interest charges and/or other legal proceedings. It is therefore important for businesses to remain compliant with the ESR requirements and take necessary actions in order to avoid any potential penalties.
Right to Appeal Against the Administrative ESR Penalty in UAE
If an administrative penalty has been issued to you by the Federal Tax Authority in UAE, you have the right to appeal against it. You can initiate your appeal within 30 days from the date of notification of the penalty. It is important that you present a concise and substantial case for review by providing supporting documents when appealing against an ESR penalty. You must make sure that your appeal contains the following information:
- The registration number of your company.
- A clear description of the penalty and its reasons.
- A statement of why you believe the penalty is unjust or incorrect.
- Evidence to substantiate your position, such as invoices, documents and supporting materials.
- Your contact information.
In order to lodge your appeal, you need to submit the appeal form along with all relevant documents and evidence to the Federal Tax Authority within 30 days of notification. The Appeal Committee will review your case and make a decision based on the evidence presented. If your appeal is accepted, any penalties imposed will be waived or reduced. If your appeal is rejected, then you will be required to pay the full amount of the penalty. It is important that you familiarise yourself with the process of appealing against an administrative ESR penalty and understand how it works in order to ensure a successful outcome.