ESR- Shipping Business

Definition

To undertake a Shipping Business, a Licensee must operate one or more ships in international traffic, for the transport of either passengers, cargo or both.

Excluded from definition:

• vessels used for fishing;

• vessels that are “small” (i.e. tonnage does not exceed ten tonnes); and

leisure vessels (e.g. cruise ships and private yachts).

Core Income Generating Activities (CIGA’s)

• Managing crew (including hiring, paying and overseeing crew members)

• Overhauling and maintaining ships

• Overseeing and tracking shipping

• Determining what goods to order and when to deliver them, organizing and overseeing voyages.

Special points to consider

The following activities will be considered a Shipping Business only where they are undertaken by a Licensee in connection with the business of operating a ship, or ships, in international traffic:

  • the rental on a charter basis of ships
  • the sale of tickets or similar documents
  • the use, maintenance or rental of containers
  • the management of the crew of ships.

Following activities are not considered as a shipping business:

  • Chartering of ships on a bareboat basis (however such activity may fall within the scope of a Lease-Finance Business depending on the terms of the bareboat charter arrangement).
  • Travel agencies and international shipping agencies selling tickets to passengers for international travel by ship.
  • Entities that arrange for their own or other businesses’ goods to be transported overseas by sea, unless they themselves operate the relevant ships.

Regulatory Authority

  • Ministry of Economy
  • Competent Authority in Financial Free Zone
  • Competent Authority in Free Zone

What licensee has to do?

  • File notification with the regulatory authority before due date.
  • Only Licensees that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an economic substance report. Economic substance returns must be filed within 12 months from the end of the relevant financial period. 

Who has to file the notification? 

Every Licensee and Exempted Licensee is required to submit a Notification to their respective Regulatory Authorities

Failure to comply with regulation:

  • Penalties between AED 20,000 to 400,000
  • Exchange of information with foreign competent authority
  • Suspension or withdrawal or cancellation of license