Economic Substance Regulations (ESR)
ESR Regulations to Enhance Transparency
The UAE introduced the Economic Substance Regulations (ESR) to align with global tax transparency standards and curb harmful tax practices. The regulations require companies on the mainland and free zones, and other business entities that carry out any of the ‘Relevant Activities’, to maintain an adequate ‘economic presence’ in the UAE.
On this page
Relevant Activities
Banking business
Insurance business
Investment fund management business
Lease - finance business
Headquarters business
Shipping business
Holding company business
Intellectual property business (IP)
Distribution and service center business
Reporting Requirements
Entities that are within the scope of the ESR are required to submit the following to their regulatory authority within 12 months from the end of their financial year:
- An annual notification form
- An Economic Substance Report
Exemptions
An entity is not required to meet the Economic Substance Test nor file an Economic Substance Report if:
- It has not earned income from a ‘Relevant Activity;’ or,
- It meets the conditions for being exempt
A Notification Form will need to be submitted regardless.
Consequences of Non-compliance
Failure to comply with the regulations can result in:
Penalties
Spontaneous exchange of information with the Foreign Competent Authority (as defined in Article 1 of the Regulations)
Administrative sanctions such as the suspension, revocation or non-renewal of the entity’s trade license or permit
Legal Framework
The UAE introduced the ESR through Cabinet of Ministers Resolution No. 31 of 2019, issued on 30 April 2019, in line with its commitment to the OECD Inclusive Framework and in response to the EU Code of Conduct Group on Business Taxation.
Supporting Guidance and Decisions Include:
- Ministerial Decision No. 215 of 2019 (issued on 11 September 2019)
- Cabinet Decision No. 58/2019 on the determination of Regulatory Authorities
- Cabinet of Ministers Resolution No. (57) of 2020 on 10 August 2020
- Ministerial Decision No. (100) of 2020
- Cabinet of Ministers Resolution No. 98 of 2024
How to Enter ESR Portal
You can enter the ESR portal with a registered MoF corporate account. If you don’t have an account, proceed to create a new account.