Economic Substance Regulations

Economic Substance Regulations


Economic Substance Regulations (“ESR”) were introduced to the UAE in April 2019.

These regulations apply to all natural or legal persons that carry out a ‘Relevant Activity’ in the UAE. This includes licensees in Free Zones, Financial Free Zones and Offshore Free Zones. The regulations apply to financial years commencing from 01 January 2019.

Reporting requirements under ESR

There are two levels of reporting for businesses falling within the scope of the Regulations.

ESR Notification:

All businesses performing a Relevant Activity, including businesses claiming exemption from ESR, are required to make a notification to the Ministry of Finance. The notification must be made within 6 months of the end of the licensee’s financial year, or expiry of trade license if the business does not have a financial year.

ESR Reporting:

Businesses that carry out a Relevant Activity are also required to submit an annual report. In this report, the business must confirm whether it meets the ESR tests. This is due 12 months from the end of the financial year.

How we can assist

If you are concerned about whether your business falls under the scope of ESR, whether it meets the ESR tests, or if you need assistance with your compliance obligations, our team of specialists can help.

Your key contacts

Mufaddal Safdari

Mufaddal Safdari

Associate Director – Tax Advisory Services
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