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Economic Substance Regulations

The UAE Economic Substance Regulations (ESR) are applicable to all companies registered in the Mainland or Free Zones or Financial Free Zonesin UAE which are licensed to perform  activities as mentioned below:

  • Banking Business
  • Insurance Business
  • Investment Fund Management Business
  • Shipping Business
  • Lease-Finance Business
  • Distribution & Service Centre Business
  • Headquarters Business
  • Intellectual Property Business
  • Holding Company Business

Spectrum’s vast resource of blogs pertaining to Economic Substance Regulations which are updated frequently will give you further information about the activities that are considered in a particular relevant activity, the definition of each activity, what is an Economic Substance Test, who is a licensee, who is exempt from ESR, etc are all discussed in detail. Explore our knowledge base to equip yourself further on this subject or you can just simply mail us to guide you further.

Economic Substance Regulation (ESR) in UAE

The United Arab Emirates (UAE) has become an increasingly attractive global business hub for companies due to various transparent laws, favourable tax regulations and an investment-friendly environment.

Since the UAE is a business-friendly country and has the advantage of tax laws, many companies are setting up with the intention to shift profits from various business activities to outside the UAE. Sometimes this creates problems in the country’s tax transparency and globally as well. To prevent this kind of harmful tax practices, The UAE has issued a set of regulations called Economic Substance Regulations as a part of UAE’s commitment as a member of the OECD (Organization for Economic Cooperation and Development) and as a response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group (EUCOCG) on Business Taxation. The UAE introduced Economic Substance Regulations (ESR) vide Cabinet Decision No. 57 of 2020 effective from January 01, 2019.

What is the Purpose of the Economic Substance Regulations Report?

The purpose of ESR is to prove the Economic presence and adequate substance in UAE for the companies established in UAE onshore, freezone and certain other business forms that carry out any of the defined “Relevant Activities” listed in ESR.

Economic Substance Test

Economic Substance Test is a detailed study to analyze a business’s activity from the view of Economic Substance Regulations to determine whether the business falls under the requirement of ESR or not. There are 9 relevant activities listed under ESR. If an entity undertakes any of the relevant activities, then it will come under ESR regulations and have to comply with all the regulations of the law. A ‘substance over form’ approach must be adopted when determining whether an entity is carrying out any of the Relevant Activities. The assessment is required to be made for individual UAE entities.

Relevant Activities Under Economic Substance Regulations

The following are the Relevant activities listed under ESR

  1. Banking Business
  2. Insurance Business
  3. Investment Fund Management Business
  4. Lease-Finance Business
  5. Headquarters Business
  6. Shipping Business
  7. Holding Company Business
  8. Intellectual Property Business
  9. Distribution and Service Centre Business

Economic Substance Notification

UAE entities that conduct any one or more of the Relevant Activities listed under ESR must notify the Ministry of Finance (MoF) through its ESR portal by filing an Economic Substance Notification within 6 months from the end of the reportable period (Financial Year). As a part of this filing, an Entity will report legal information, regulatory authority, reportable period, type of relevant activities, and income generated from carrying out the relevant activities for the reportable period.

Economic Substance Report

An Entity that conducts Relevant activity and earns income out of it is required to file an ESR report via the Ministry of Finance’s online ESR portal within 12 months from the end of the reportable period (Financial Year).

With this reporting, an Entity discloses various information including financial data to the ministry. The important details includes Basic details, type of relevant activity conducted, reportable period, CIGAs applicable, relevant income, costs and profits earned, details of parent, ultimate parent company and UBOs, number of full-time employees, direction and management of the company, meetings etc.

Submission Deadline for Notifications and Economic Substance Reports

ESR notification is required to be submitted within 6 months from the end of the reportable period (Financial Year) via the Ministry of Finance’s(MOF) online ESR portal.

ESR report is required to be submitted within 12 months from the end of the reportable period (Financial Year) via the Ministry of Finance’s (MOF) online ESR portal.

Penalties under the Economic Substance Regulations

Type of Offence Amount of Penalty
1.      Failure to submit the ESR Notification AED 20,000
2.      Failure to submit the ESR Report AED 50,000
3.      Failure to meet the Economic Substance Test 1st year – AED 50,000

2nd consecutive year – AED 40,000

4.      Failure to provide accurate and complete information AED 50,000

Who is an Exempted License

The ESR Regulations exclude certain forms of entities from the requirement to meet the Economic Substance Test. For the purpose of the ESR Regulations, an Exempted Licensee includes any of the following entities registered in the UAE and which carry out a Relevant Activity:

(1) an Investment Fund;

(2) an entity that is tax resident in a jurisdiction other than the UAE;

(3) an entity wholly owned by UAE residents and meets the following conditions:

(a) the entity is not part of a MNE Group;

(b)   all of the entity’s activities are only carried out in the UAE;

An Entity making an Exemption claim is only required to file a notification along with supporting documents to substantiate the exemption claim

Who is exempt from filing a Notification?

Licensees who are not conducting any relevant activity under ESR are exempt from filing ESR Notification.

Who is exempt from filing a Report?

Exempted licensees and Licensees who conduct relevant activity and did not earn relevant income for the reportable period are not required to file an ESR report.

Economic Substance Regulations Filing  in Dubai UAE

Economic Substance Regulations Filing Company in Dubai UAE

Economic Substance Regulation filing company in Dubai is a company that provides all Economic Substance Regulation related services in Dubai. Spectrum Auditing is a leading Auditing and Taxation company in Dubai. We have a dedicated professional team for assisting companies across UAE with the ESR-related compliances and filing.

Different types of Economic Substance Regulations filing services that we are offering in Dubai UAE

We are a leading corporate service provider in Dubai. We offer various ESR-related services that are listed below

  1. Economic Substance Test (ESR Assessment)
  2. Economic Substance Notification filing
  3. Economic Substance Report filing
  4. Assisting in data and financials preparation for the filing of ESR Notification and ESR report
  5. Assisting in ESR audit
  6. Providing Economic Substance Regulations related advisory
  7. Assisting in filing ESR appeals
  8. Assisting in ESR documentation

Our Economic Substance Regulations Filing Process

  1. Understanding the business via meeting with the experts
  2. Detailed Economic Substance Test
  3. Assistance in documentation
  4. ESR Notification filing
  5. ESR report filing
  6. Follow up with Regulatory authority in case of any issues
  7. Assistance in filing ESR appeal in case of any penalties imposed due to non-compliance with ESR requirements

Why Choose Spectrum For Economic Substance Regulations Report Services in UAE?

We Spectrum Auditing is a team of qualified finance professionals who offer various corporate services including various ESR related services listed above. We have a dedicated team who will assist you with all the ESR related compliances and filings. We have been in the field of providing ESR services from the beginning of ESR came into force across UAE.

Benefits Of Hiring Our ESR Filing Company in Dubai UAE

We offer all the ESR-related services with the help of our qualified finance professionals’ team. Hiring an expert ESR auditing company will be the best option to take care of all the ESR-related compliances of your company and will assist you with all the requirements.


Included in the relevant activity of Economic Substance Regulations

Banking Business:

Insurance Business:

Investment Fund Management Business:

Lease-Finance Business:

Headquarters Business:

Shipping Business:

Holding Company Business:

Intellectual Property Business:

Distribution and Service Centre Business:

Spectrum offers end-to-end accounting and audit services apart from providing a varied business advisory services portfolio.
Call us today for a consultation at +971 4 269 9329 or email us at  [email protected]


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.

No, each Licensee must file an Economic Substance Report on a stand-alone basis, irrespective of whether the Licensee is part of a consolidated group for financial reporting or VAT purposes.

A UAE corporate entity that operates through one of more branches registered in the UAE must report the Relevant Activities of itself and those of its UAE branches in one composite Economic Substance Report. The Economic Substance Report must be filed with the Regulatory Authority with which the Head Office is registered. A UAE branch of a foreign entity is not required to file an Economic Substance Report if the Relevant Income of the UAE branch is reported and subject to tax in the jurisdiction of the foreign parent / head office. Where a UAE entity carries on a Relevant Activity through a foreign branch or permanent establishment that is subject to tax in the foreign jurisdiction, the UAE entity should not report (i.e. exclude) in its Economic Substance Report the Relevant Income, assets, expenditure and employees of the foreign branch or permanent establishment.

If the Licensee undertakes a Relevant Activity in the year of liquidation, the entity or its liquidators must ensure that all obligations under the Economic Substance Regulations are satisfied for the period up to liquidation, including the filing of a Notification and Economic Substance Report (where applicable).

Non-compliance with the obligation to file an Economic Substance Report before the deadline is subject to a penalty of AED 50,000, and can result in the Licensee being deemed to have failed the Economic Substance Test for the relevant Financial Year.

Reportable period is the accounting period during which an Entity carries relevant activity.

Economic Substance Regulations came into force from the financial year starting from January 01, 2019.

No, the UAE head office/parent company must file a single consolidated Notification that includes details of all its UAE branches that carry out a Relevant Activity, irrespective of whether the head office itself undertakes a Relevant Activity.

The Notification must be submitted electronically on the Ministry of Finance ESR portal.

Yes. If you get any penalty due to non-compliance with ESR requirements, the ministry will give you a chance to file an appeal against the penalty imposed within a stipulated time.

The regulatory authority will review the application for appeal and will waive off the penalty on sufficient grounds.

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.

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