Check this link to know more: https://www.spectrumaccounts.com/economic-substance-regulations/   What is all about ESR?: As part of the UAE’s commitment being a member of the OECD Inclusive Framework, in response to an assessment of the UAE’s tax framework by the European Union (“EU”) Code of Conduct Group on Business Taxation, the UAE introduced a Regulation on the Economic Substance (Cabinet of Ministers Resolution No.31 of 2019, the “Regulations”) on 30 April 2019. Is it applicable to your business? The regulations are applicable to all the companies in UAE except to a very limited section of the organisations. The regulations are applicable to companies in all the free zones doing relevant activities. What is the effective date? The Regulations apply to financial years commencing on or from 1 January 2019. What are the 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 Centre Business

Once a UAE company has been identified as undertaking relevant activities, the ESR requires the company to satisfy the economic substance test which comprises three elements: 1). It is directed and managed in the UAE in relation to that activity 2). It conducts Core Income-Generating Activities (CIGA) in the UAE 3). It meets the adequate requirements with regard to the level of relevant activity carried on in the UAE. What is the way forward if ESR is applicable to your business? If you are carrying out the relevant activities and you are earning income out of it, you may have to give a notification, make the necessary changes in the way you operate the business if you are not managing it the way it is needed as per the law and submit the ESR report by testing whether we met the conditions or not. What are the due dates for submission of the ESR notification and ESR Report? Notification and ESR Report should be submitted with the relevant authority with 12 months from the end of the financial years beginning on after 1st January 2019. This means it should be filed on or after 1^st January 2020 but before 31st December 2020 for the companies having year ended 31^st December 2019. What are the penalties for not complying with ESR?