Economic Substance Regulations Reporting

All the entities are required to maintain a fair “economic presence” in the nation applicable to the activities they engage in, according to the economic substance regulations put out by the UAE in 2019.

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Your business is just yours. You choose it. You make it happen! You live it. Therefore, it’s your responsibility to abide by the guidelines and laws issued by Government bodies and meet the requirements set by various authorities of the country your business exists in to successfully run the operations. There are tons of them. After setting up business in Dubai or any of the emirates of the UAE, all the entities are required to maintain a fair “economic presence” in the nation applicable to the activities they engage in, according to the economic substance regulations (the “Regulations”) put out by the UAE in 2019.

Understand “ESR”

The commitment as a member of the OECD Inclusive Framework and the urge to respond to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation drove the UAE to introduce Economic Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019), (the “Regulations”) on 30 April 2019. Guidance on the application of the Regulations was issued on 11 September 2019 (Ministerial Decision No. 215 of 2019), and Cabinet Decision No. 58/2019 on the Determination of Regulatory Competencies lists the Regulatory Authorities tasked with the administration and enforcement of the Regulations. Amendments to the Regulations were done by Cabinet of Ministers Resolution No. (57) of 2020 on 10 August 2020, and updated Guidance was issued on 19 August 2020 (Ministerial Decision No. (100) of 2020 The Regulations require UAE onshore and free zone companies and certain other business forms that carry out any of the defined “Relevant Activities” listed below to keep and exhibit a sufficient “economic presence” in the UAE relative to the activities they undertake (“Economic Substance Test”).

  • Banking Business
  • Insurance Business
  • Investment Fund management Business
  • Lease – Finance Business
  • Headquarters Business
  • Shipping Business
  • Holding Company Business
  • Intellectual Property Business (“IP”)
  • Distribution & Service Centre Busines

The Regulations are applicable for all those entities that got into business activities on or beyond the 1st of January 2019. Entities that are within the scope of the Regulations have to submit an annual Notification form to their Regulatory Authority, and complete and submit to the same Regulatory Authority an Economic Substance Report within 12 months from the end of their financial year (e.g. 31 December 2020 for entities with a financial year ending 31 December 2019). An entity doesn’t have to meet the Economic Substance Test and file an Economic Substance Report for any financial period in which it has not earned income from a Relevant Activity or if it meets the conditions for being exempt. A Notification form must be submitted regardless. Failure to comply with the Regulations can cause penalties, spontaneous exchange of information with the Foreign Competent Authority (as defined in Article 1 of the Regulations), and other administrative sanctions viz. suspension, revocation or non-renewal of the entity’s trade licence or permit.

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Economic Substance Regulations Reporting Services in Dubai, UAE

According to the regulations, the UAE-based free zone, and financial free zone companies in that carry out the relevant functions mentioned in the guidance are bound to present satisfactory economic presence by meeting the UAE economic substance test. The companies are required to notify and submit an annual UAE economic substance report to the regulatory authorities if they are meeting the criteria to avoid hefty penalties. A caveat: The regulation is new, and we have seen many companies failing to comply with the standards and providing inaccurate or incomplete information, leading to heavy penalties. Luckily, you can delegate the complicated task to an experienced and best UAE-based Economic Substance Advisory firm. The expert assistance from Economic Substance Regulations Reporting service professionals not only keeps you from committing such grave mistakes but also ensures Economic Substance compliance.

Pass the Buck to Adam Global

With members situated across 200+ jurisdictions covering unique practice areas, Adam Global is one of the leading business setup consulting firms in Dubai, UAE that can take care of all the complex requirements of the businesses in connection with the Economic Substance Reporting in Dubai, UAE. Our highly qualified advisors can help the companies know whether they are subject to the regulations. If they do, then we assess the operation of the companies across all the emirates (onshore/free zones) to figure out if the current activities are expected to fulfill the requirements of the UAE Economic Substance Reporting. We can advise companies with effective solutions to adhere to the regulations. You can count on our pro team of Economic Substance Regulations Reporting specialists in Dubai for all your ESR requirements, from assessing your eligibility for ESR to preparing the notification and the report to be submitted to the concerned Regulatory Authority.


Contact Us for A Free Consultation!

Don’t wait until it’s too late. Contact Adam Global Auditing & Accounting today to learn more about how we can help your business comply in the UAE and maximize your savings. 

To get your personalized consultation, simply click the “Get a callback” button and schedule a call with one of our specialists.

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