Reasons for noncompliance & receipt of a penalty
1)The FY 2019 ESR Submissions (Notification &/or Report) were submitted in December 2020. Many organisations have followed the same pattern and assumed that the deadline for ESR submission was in December. As a result of that assumption, entities have ended up submitting their notification for FY 2020 on December 21 rather than June 21. This has caused a delay in the submission of the Notification and has resulted in a penalty of AED 20,000. Due to a change in the Regulation, submission of FY 2019 in Dec2020 was delayed until Dec 20, and thus the deadline for FY 2019 submission was extended until Dec 20. However, beginning in fiscal 2020, the due date was as defined in the aforementioned regulation.
2)Entities submitted the notification well before the deadline, but did not submit the ESR report on time. This will result in a penalty of AED 50,000.
3)In FY 2019, entities incorrectly assessed the ESR’s applicability, and the same interpretation was used in FY 2020. In addition, there was a delay in submission, which resulted in a penalty from FTA.
4)FTA requested additional information, but the entity did not respond by the deadline.
5)The entity had submitted a Notification with the relevant activity marked as “No.” However, it was later discovered that the entity engages in relevant activity and a change was requested. However, because the amendment request was not approved by the reporting deadline, the Report is being submitted late. The ESR report tab will not be activated on the dashboard unless relevant activity and relevant income are notified in the notification. As a result, an amendment request is required.
The crucial point to remember
It is critical to evaluate the activities carried out by your company during the reporting period. The applicability of ESR is entirely dependent on the activities carried out by your company. Incorrect assessment can result in both monetary and non-monetary penalties.
What should your next step be if you are penalised? Licensees have the option to appeal the penalty and provide clarification to the authority.
Learn More: https://kgrnaudit.com/esr-penalty-email-from-fta/
