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Adapting to Economic Substance Regulations in UAE

July 29, 2020

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As the world continues to grapple with unprecedented challenges and disruptions to ‘normal’ working practices, some businesses are finding it harder than others to maintain financial stability.

A company’s ability to adapt to change is often compared to a ‘fight or flight’ scenario in which they must choose between surrendering to adversity or embracing new opportunities to overcome hardship.

Here at INAA, we’re delighted to report that member organisation, CRESCO Accounting Limited Dubai, is thriving amidst the uncertainty of recent times. We’re committed to sharing positive updates and drawing inspiration from forward-thinking firms to support businesses of all shapes and sizes throughout the pandemic.

Join us as we explore how CRESCO is exploring the benefits of accounting system automation in the United Arab Emirates (UAE) to help businesses adapt to economic substance regulations and boost revenue.

Introducing CRESCO Accounting Limited

CRESCO Accounting is an ISO-certified chartered firm, specialising in a full range of accounting and audit services across its offices in the Philippines, Seychelles, and the UAE.

As a subsidiary of CRESCO Holding Ltd., their accounting division is committed to providing proficient and cost-effective finance solutions to help offshore and onshore clientele realise their full business potential.

Following news that CRESCO’s Dubai outfit was experiencing unprecedented growth amidst the COVID-19 pandemic, we sat down with Accounting Managing Director, Maricar Gonzaga, to get an inside look at how she and her team have found a valuable gap in a highly-disrupted market.

Specifically, Ms. Maricar Gonzaga discusses how her UAE team have adopted automated systems to help clients adjust the latest Economic Substance Regulations (ESRs). Let’s take a look at what these regulations involve and how CRESCO Accounting Limited Dubai has managed to double its revenue over the past few months.

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What Are Economic Substance Regulations?

On 1st January 2019, the UAE Ministry of Finance introduced ECRs to prevent businesses undertaking certain activities in the UAE from artificially attracting profits that are not commensurate with local economic activity.

Qualifying businesses may need to submit an economic substance declaration and pass an Economic Substance Test to remain compliant with the new regulations. The test requires businesses to demonstrate the following:

  • Licensee and relevant business activities are directed and managed in the UAE.
  • Core income-generating activities are conducted in the UAE.
  • Licensees have sufficient employees, expenditure, and physical presence in the UAE.

Economic Substance Regulations During COVID-19

While CRESCO has extensive experience with helping clients negotiate the regulations over the past year, updated ECR guidelines since the outbreak of the pandemic have presented new opportunities for the firm to thrive.

The introduction of a COVID-19 Industry Advisory Notification (IAN) on 28th May 2020 accommodates travel restrictions and quarantine measures by relaxing rules around board members having a physical presence in the UAE.

While the Ministry of Finance aims to support businesses during this turbulent period, the changes require a rapid adjustment to new compliance measures and hands-on support from accounting and audit professionals to review internal policies and provide the necessary documentation.

Ms. Maricar Gonzaga explains how the sudden need for professional support and a surge in administrative tasks provided an opportunity for CRESCO to offer clients dedicated support with rapid turn-around times.

As businesses scrambled to adjust their operations ahead of the first set of ESR filing requirements on 30th June 2020, she expressed gratitude for her team and their proactive approach which helped them double their client base in a matter of weeks.

Benefits of Accounting System Automation & Future-Proofing With IT

Ms. Maricar Gonzaga identifies CRESCO’s commitment to staying up-to-date with the latest IT systems as a vital success-factor for her Dubai team over the last few months. While taking the initiative to adjust their services amidst a global pandemic is a credit in itself, she explains how combining this drive to succeed with an established IT infrastructure gave them a winning edge over rivals.

The use of automated accounting systems meant CRESCO could handle the influx of administrative tasks while maintaining the highest quality of service to clients. Additionally, their preparedness in building digital processes promoted a seamless transition to remote working that wasn’t possible for most competitors.

Ms. Maricar Gonzaga explains how their forward-thinking company culture and proactive attitude towards IT investment has helped to future-proof CRESCO and provide a vital lifeline when the pandemic struck.

Ultimately, she explains how their ability to thrive amidst uncertainty is a reminder that “living in unprecedented times calls for an unprecedented response” and “looking ahead a few steps ahead of the market is a manifestation of your capacity to adapt to the demands of today.

Champion the Future of Accounting With INAA

CRESCO’s ability to stare in the face of adversity and adjust their services to thrive in recent months is a prime example of how businesses can embrace change and welcome new challenges.

As the accounting sector continues to adjust to a digital landscape and the globalisation of contemporary business presents new opportunities for accountants, fostering a resilient company culture can be the difference between success and failure. Businesses must harness the power of technology to enhance their services and explore new avenues for international growth to thrive in the modern world of accounting.

Established over 25 years ago, INAA is committed to facilitating cross-border partnerships and connecting accounting firms that are open to sharing their expert knowledge to champion progress across the accounting sector.

Join today to build powerful business relationships and unlock exciting opportunities.