The Economic Substance Report is a requirement under the Cabinet of Ministers Resolution No 57 of 2020 Concerning Economic Substance Requirements in the UAE. It requires certain businesses to demonstrate they have substantial economic presence and are conducting substantial economic activities in the UAE.

Businesses in the UAE that conduct "Relevant Activities" as defined by the regulations are required to submit an Economic Substance Report. These relevant activities include: - banking, - insurance, - fund management, - finance and leasing, - shipping, - intellectual property, - headquarters business, - distribution and service centers, and - holding company business.

A business is expected to do the following if it conducts any relevant activities under ESR Act: • Comply with the requirements of the substance in UAE along with the documentation • Submit ESR Notification in time • Submit ESR Report in time

Following are the due dates to submit ESR Notification and ESR Reports in UAE: • ESR Notification shall be submitted within 6 months from the end of the financial year • Submit ESR Report shall be submitted within 12 months from the end of the financial year

Non-compliance with the Economic Substance Regulations can result in penalties, spontaneous exchange of information with foreign competent authorities, and potential suspension, revocation or non-renewal of the company's trade license. The penalty for non-submission of ESR Notification in time is AED 20,000 and for non-submission of the ESR Report in time is AED 50,000.

A tax consultancy can help businesses understand the regulations, assess whether they conduct "Relevant Activities", and prepare and submit the ESR Notification and Economic Substance Report.

The Economic Substance Report includes information about the type and amount of relevant income, the amount and type of operating expenses and assets, the location of the business, the number of employees with qualifications, and details of the company’s economic activities.

"Relevant Activities" are specific types of business activities defined under the UAE Economic Substance Regulations. They include banking, insurance, fund management, finance and leasing, shipping, intellectual property, headquarters business, distribution and service centers, and holding company business.

Yes, branches of foreign companies operating in the UAE and conducting "Relevant Activities" are subject to the Economic Substance Regulations and must meet the Economic Substance Test.

The Economic Substance Regulations were introduced in response to global initiatives against harmful tax practices. The regulations aim to ensure that UAE entities that undertake certain activities are not used to artificially attract profits that are not commensurate with the economic activity undertaken in the UAE.

Pure equity holding companies have a reduced Economic Substance Test in the UAE. They are required to comply with the regulations and report, but their requirements are less extensive than for other entities.