The UAE has recently introduced sweeping changes to its Economic Substance Regulations (ESR), impacting businesses across the region. This shift of ESR in the UAE simplifies compliance requirements and aligns with the nation’s strategic approach to maintaining a favorable business environment while complying with international tax standards.

Here’s an in-depth look at what these changes mean for businesses operating in the UAE.

Key Updates to ESR in the UAE and Their Impact on Businesses

1. ESR Compliance Lifted for Financial Years Starting in 2023 and Beyond
    Starting from the 2023 financial year, companies in the UAE are no longer required to submit ESR notifications, annual reports, or demonstrate economic substance. Previously, ESR in the UAE applied to certain “relevant activities,” aiming to ensure a genuine economic presence for businesses. Now, businesses can streamline their compliance processes without the additional layer of ESR obligations.
2. Administrative Penalty Waivers and Refunds
    Under this new regulatory framework, any administrative penalties related to filings for financial years beginning on or after January 1, 2023, are now canceled. Companies penalized for non-compliance with ESR in the UAE in this period may be eligible for refunds, which can be processed through the UAE Ministry of Finance’s e-refund portal. This waiver provides relief to companies that may have encountered unexpected penalties due to procedural lapses in ESR compliance.
3. Continued Responsibilities for Financial Years 2019-2022
    Although ESR requirements have been lifted for 2023 and beyond, companies that operated between January 1, 2019, and December 31, 2022, must still meet their ESR compliance obligations for that period. This includes any outstanding reports, notifications, and possible follow-ups with regulatory authorities. Businesses must address any non-compliance issues from this period to avoid penalties or restrictions in the future.

Why the Change?

The UAE’s introduction of Corporate Tax (CT) regulations is central to this shift in compliance requirements. With Corporate Tax now incorporating economic substance provisions, separate ESR filings have become redundant. This harmonized approach helps businesses by reducing administrative tasks while ensuring compliance with international tax frameworks. The UAE aims to attract global businesses by easing compliance burdens, positioning itself as a leading business hub aligned with transparency standards.

Updates to ESR in the UAE: Key Considerations for Free Zone Businesses

While ESR in the UAE is no longer applicable, businesses in Free Zones, particularly those aiming to benefit from the UAE’s 0% Corporate Tax rate, must still demonstrate sufficient economic presence. Free Zone Persons must conduct core income-generating activities within the free zone, meet staffing requirements, maintain adequate operational expenses, and own or lease physical assets appropriate for their business scale. These requirements are essential for qualifying under the 0% CT regime.

ESR in the UAE: Next Steps for Businesses

1. Review and Address ESR Compliance (2019-2022):
    Ensure all ESR reports and notifications are complete and accurate for the relevant period to avoid future compliance issues.
2. Evaluate Free Zone Substance Requirements:
    For Free Zone companies, assessing current operational structures to ensure alignment with Corporate Tax requirements is essential, particularly for businesses seeking the 0% CT rate.
3. Take Advantage of Penalty Waivers and Refunds:
    Companies penalized for non-compliance in the post-2022 period should verify eligibility for administrative penalty refunds. Refunds can be requested through the Ministry of Finance’s portal.
4. Stay Informed on Evolving Compliance Standards:
    As the UAE continues refining its tax and compliance frameworks, staying updated on regulatory guidelines will be crucial for UAE-based businesses.

The recent overhaul of the ESR in the UAE signals a transformative phase for the region’s compliance landscape, paving the way for a more integrated approach to taxation and economic activity. As the UAE continues to refine its regulatory framework, the future of ESR appears to hinge on its alignment with Corporate Tax provisions, simplifying compliance for businesses and fostering a more attractive investment climate.

Moving forward, businesses should anticipate a focus on economic substance being evaluated through the lens of Corporate Tax compliance, rather than through separate ESR filings. This evolution may lead to enhanced scrutiny on companies operating in Free Zones, emphasizing the need for genuine economic activity to sustain benefits like the 0% Corporate Tax rate.

In a world where transparency and compliance are key to global business success, the UAE stands out as a forward-thinking nation, committed to aligning with international tax standards. The Economic Substance Regulations (ESR) plays a key role as a game-changer that is redefining the UAE’s spot on the global stage. From safeguarding trade relationships to encouraging genuine economic activity, the role of ESR in the UAE positions the nation as a trusted and competitive hub for global investment.

Before delving in to the role of ESR in the UAE, let’s quickly define what ESR is.

Economic Substance Regulations (ESR) in the UAE are designed to ensure that companies conducting certain activities, such as banking, insurance, and investment management, have a real economic presence in the country. Introduced to align with international standards set by the OECD and EU, ESR requires businesses to maintain sufficient staff, premises, and operations within the UAE. Role of ESR in the UAE is important and these regulations aim to prevent tax avoidance practices and promote transparency, reinforcing the UAE’s reputation as a compliant and attractive jurisdiction for global business.

Role of ESR in the UAE Regulatory Landscape

1. Alignment with International Standards and Commitments

The implementation of ESR reflects the UAE’s commitment to meeting international tax standards, particularly those set by the Organization for Economic Co-operation and Development (OECD) and the European Union (EU). By adhering to the Base Erosion and Profit Shifting (BEPS) framework, the UAE reinforces its reputation as a cooperative jurisdiction in global tax matters. This alignment underscores the role of ESR in the UAE, as it is essential not only for maintaining favourable trade relationships but also for avoiding potential inclusion on international blacklists, which could impact the country’s economy and foreign investments.

Complementing Other Regulatory Measures

ESR is not an isolated regulation; it complements several other regulatory measures in the UAE. For example, ESR intersects with the UAE’s Federal Corporate Tax Law, which requires entities to align their activities and structures in compliance with local tax obligations. It also relates closely to Transfer Pricing (TP) regulations, as both sets of rules ensure that businesses have substance in the UAE and that transactions between related entities are conducted at arm’s length.

The Anti-Money Laundering (AML) regulations are another important component of the UAE’s regulatory framework. ESR supports AML efforts by requiring businesses to provide transparency about their operations, ownership, and economic activities, thereby reducing the risk of illicit financial flows. All these highlight the role of ESR in the UAE.

2. Encouraging Genuine Economic Activity

The core purpose of ESR is to encourage businesses to establish a real economic presence in the UAE. This aligns with the country’s strategic vision to diversify its economy away from oil dependency and foster sustainable growth. By compelling companies to maintain adequate premises, employ sufficient staff, and incur local operating expenditures, ESR drives genuine investment and economic activity within the UAE. This, in turn, contributes to the development of key sectors and supports the UAE’s ambition to become a global business hub.

3. Enhancing Investor Confidence

ESR plays a significant role in enhancing investor confidence by promoting transparency and fairness. International investors are increasingly prioritizing jurisdictions that offer not only tax efficiency but also robust regulatory frameworks that mitigate risks associated with tax evasion and avoidance. The UAE’s adoption of ESR sends a strong message that it is a safe and reliable destination for long-term investment.

Role of ESR in the UAE: Upcoming Deadline

An important ESR deadline is approaching for businesses in the UAE and compliance is crucial. If your financial year concluded on 31st March 2024, you must submit your ESR notification by 30th September 2024. Missing this deadline can result in significant penalties, including financial fines and increased scrutiny from regulatory authorities. To avoid these risks, it’s critical to ensure that your E SR notification is filed on time, reinforcing your company’s commitment to compliance and its reputation within the UAE’s competitive business landscape.

Mastering ESR in the UAE with MS’s Expertise

Staying compliant with ESR is essential to avoid penalties and protect your business’s reputation. At MS, we are dedicated to simplifying the ESR filing process for you, providing expert guidance at every step. Our tailored services help you determine if your business undertakes Relevant Activities, ensuring accurate assessment and seamless compliance. With our experienced team by your side ESR regulations in the UAE becomes a straightforward and stress-free experience, allowing you to focus on growing your business with confidence.

Think the UAE is just a land of luxury and sunshine? Think again. The country is making waves in the world of international finance, and it’s not just about the glitz and glamour.

The UAE’s firm stance against tax evasion and money laundering, exemplified by the implementation of the Economic Substance Regulations (ESR), underscores the nation’s commitment to promoting fairness and transparency in the global financial landscape. This proactive approach not only enhances the UAE’s reputation as a responsible international financial hub but also aligns with global standards for integrity and accountability. So, what’s the big deal about ESR? Well, it’s all about substance overshadow. The UAE wants to make sure that companies aren’t just setting up to avoid paying taxes. It’s about ensuring that businesses are contributing to the local economy and creating jobs.

But why should you care? Whether you’re a business owner, an investor, or just someone interested in the global economy, the UAE’s commitment to tax transparency is a major development. It’s a sign of a country that’s serious about playing by the rules and building a sustainable future.

Overview of the UAE Economic Substance Regulations (ESR)

The ESR requires certain UAE-based legal entities, including those in free zones, to comply with annual filing requirements if they conduct one or more of the nine specified relevant activities (RA). These entities, referred to as “licensees,” must adhere to the following obligations:

1. ESR Notification: Licensees must submit a notification within six months from the end of their fiscal year (FY). This notification must declare whether the entity undertakes any relevant activities, regardless of whether the entity is exempt from ESR or has earned income from these activities.
2. ESR Report: If the entity has earned income from relevant activities and is not exempt from ESR, it must submit a detailed report within 12 months from the end of the FY. This report should include specific business information related to the relevant activities.

Upcoming ESR Deadline

If your business’s financial year ended on 31^st March 2024, you must file the ESR notification 30th September 2024. Failure to meet these deadlines can result in significant penalties.

Penalties for Non-Compliance with ESR

Non-compliance with ESR can lead to hefty fines, which are as follows:

• Failure to submit the ESR notification: AED 20,000
• Failure to submit the ESR report: AED 50,000
• Failure to submit the ESR report for a consecutive year: AED 400,000
• Providing inaccurate information: AED 50,000

These penalties highlight the importance of timely and accurate reporting under ESR.

Interaction Between ESR and the UAE Corporate Tax Law

The UAE’s Corporate Tax Law, introduced under Federal Decree-Law No. 47 in December 2022, has introduced a new layer of compliance for businesses in free zones. The Free Zone Corporate Tax (CT) Regime allows “Qualifying Free Zone Persons” (QFZPs) to benefit from a 0% corporate tax rate on qualifying income. However, to qualify as a QFZP and benefit from this tax relief, businesses must meet certain substance requirements in their respective free zones.

Substance Requirements Under the Free Zone CT Regime

To benefit from the Free Zone CT Regime, QFZPs must demonstrate an adequate level of substance in the free zone. This means that the entity must have sufficient staff, assets, and operating expenditure in the free zone relative to the nature and level of its activities and the qualifying income it earns. Importantly, while the ESR allows entities to conduct their core income-generating activities (CIGA) anywhere in the UAE, the Free Zone CT Regime requires that these activities be conducted, or at least controlled and supervised, from within the free zone.

A QFZP can outsource its activities to related or unrelated persons within the free zone, provided that it exercises control and supervision over these outsourced activities. However, failing to meet these substance requirements could result in the loss of QFZP status and the associated tax benefits for up to five years.

Steps to Meet ESR Notification and Reporting Deadlines

To ensure compliance with ESR, business owners should take the following steps:

1. Conduct a Self-Assessment: Determine whether ESR obligations apply to your business.
2. Evaluate Reporting Obligations: Assess the extent to which ESR reporting obligations apply to your business.
3. Review Business Changes: Identify any changes in your business since the last fiscal year that could affect your ESR obligations.
4. Timely Documentation: Ensure the timely completion and submission of relevant ESR documentation, especially in light of any changes.

The UAE’s ESR and the Free Zone CT Regime are critical components of the country’s efforts to enhance tax transparency and align with global standards. By understanding and meeting the compliance requirements, businesses can avoid penalties and continue to benefit from the UAE’s favorable tax regimes. As the regulatory landscape evolves, staying informed and proactive is key to maintaining compliance and safeguarding your business interests.

Ensure ESR Compliance with MS

Staying on top of Economic Substance Regulations (ESR) deadlines is crucial to avoid penalties and other repercussions. At MS, we are committed to guiding you through every step of the ESR filing process. Our expert services are tailored to help you accurately assess whether your business engages in Relevant Activities, making ESR compliance seamless and stress-free.

Our experienced team provides the expertise and support you need to confidently navigate the complexities of ESR regulations in the UAE.

In recent years, the European Union’s impact on global tax regulations has extended to the United Arab Emirates (UAE). Embracing its commitment to the OECD’s Inclusive Framework, the UAE has implemented the Economic Substance Regulations (ESR), significantly affecting businesses within its Free Zones and Financial Free Zones, including the prominent Abu Dhabi Global Market (ADGM).

Let’s delve into the specifics of ESR in the ADGM, providing a comprehensive guide for businesses exploring these new regulatory waters.

Who is affected by ESR in the ADGM?

ESR applies to ADGM Licensees, which are essentially legitimate businesses and unincorporated groups registered with a competent authority and engaged in specific activities defined by the ESR. These activities are broadly categorized as Relevant Activities.

Relevant Activities covered by ESR in the ADGM

Here’s a list of business sectors in ADGM that fall under the ESR purview:

• Financial Services Industry (Banking, Insurance, etc.)
• Investment Fund Management
• Lease-Finance Industry
• Headquarters Businesses
• Shipping Industry
• Holding Companies
• Intellectual Property Businesses
• Distribution and Service Center Businesses

What are the ESR requirements for ADGM Licensees?

If an ADGM Licensee conducts any of the Relevant Activities and generates income from them, they must pass the ESR Test as mandated by the regulations. This essentially demonstrates that the business has a genuine economic presence in ADGM.

Understanding the Reportable Period

The ESR regulations define a Reportable Period as the accounting reference period or financial year for which an ESR Notification needs to be filed. This period should ideally match the timeframe for which the Licensee prepares its financial statements (if applicable).

Filing ESR Notifications and Reports

ESR Notifications and Reports must be submitted electronically through the Ministry of Finance’s dedicated ESR portal. It’s crucial to note that the Registration Authority won’t approve any ESR submissions filed outside this portal, potentially leading to legal repercussions.

Annual Filing of ESR Notification

ADGM Licensees, including those categorized as Exempt Licensees, who engage in Relevant Activities are obligated to file an ESR Notification within six months of the Reportable Period’s end. Failing to do so or submitting it after the deadline can attract penalties from the Federal Tax Authority (FTA).

ESR Reporting Requirements

Licensees who qualify for an ESR exemption but still conduct a Relevant Activity that generates revenue must undergo the ESR test and submit an ESR Report within a year from their fiscal year-end. Similar to the Notification, missing the deadline for filing the Report can invite penalties from the FTA. ESR applies to all businesses operating in ADGM that conduct Relevant Activities. This includes ADGM foundations, which would also be required to comply with the ESR regulations.

Understanding ESR Exemptions for ADGM Licensees

Even if an ADGM Licensee engages in a Relevant Activity, they might be exempt from filing an ESR Report. Here’s a breakdown of who qualifies for exemption:

• Businesses wholly owned by UAE citizens or residents, operating solely within the UAE and not affiliated with a Multi-National Enterprise (MNE) group.
• Entities dealing exclusively with investment reserves as defined by UAE laws.
• Branches of foreign companies where all Relevant Income generated in the UAE is subject to tax in the foreign company’s jurisdiction.
• Special Purpose Vehicles (SPVs) or Investment Holding Companies relevant to Investment Funds as per the ESR definitions.
• Businesses that are tax residents in a jurisdiction outside the UAE.

ESR Filing Deadlines

The ESR regulations mandate that ESR Reports be filed within twelve months of the Reportable Period’s end, whereas ESR Notifications have a deadline of six months from the same period’s end.

Understanding and complying with ESR requirements are crucial for businesses operating in ADGM, especially those engaged in the defined Relevant Activities. By familiarizing yourself with the regulations, filing deadlines, and exemption criteria, you can ensure your business operates smoothly and avoids potential legal or financial consequences.

How MS can help with ESR in the ADGM

Businesses in the Abu Dhabi Global Market (ADGM) that engage in Relevant Activities must comply with the Economic Substance Regulations (ESR). Missing ESR filing deadlines can result in penalties. MS can help you navigate the entire ESR process. Our services include determining if your activities are relevant, simplifying the filing process, and ensuring compliance to avoid penalties. Don’t let ESR compliance be a burden. Partner with MS to safeguard your business’s future and financial well-being.

The UAE’s business environment is booming, and simply registering a company isn’t enough anymore. The Economic Substance Regulations (ESR) are here to make sure companies are truly operating and contributing to the UAE’s economy. These regulations apply to both free zones and onshore businesses. By following the ESR, you’ll not only be compliant, but you’ll also demonstrate your commitment to the UAE’s growth and showcase that your business is here for the long haul.

What are Economic Substance Regulations (ESR)?

ESR is a set of rules that require businesses to actively perform their services and validate their economic presence in the UAE. These regulations are specified under the Cabinet of Ministers Resolution No. 57 of 2020. Only businesses engaged in certain “Relevant Activities” are subject to ESR compliance.

Relevant Activities Under ESR

According to Article No. 3 of Resolution No. 57, the following activities are classified as relevant and thus fall under the scope of ESR:

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

Businesses engaged in any of these activities must comply with ESR requirements, which include annual ESR filing and reporting.

Core Income Generating Activities (CIGAs)

CIGAs are the primary activities carried out by a licensee to generate income from their relevant activities. Here’s a breakdown of CIGAs for each relevant activity:

1. Banking Business

The banking sector under the ESR must demonstrate active engagement in various core activities. These include raising funds, managing risks related to credit, currency, and interest rates, and taking hedging positions to mitigate financial uncertainties. Banks are also required to provide financial services such as loans and credit facilities to customers, manage their capital effectively, and prepare comprehensive regulatory reports. The UAE Central Bank, along with competent authorities in Financial Free Zones, oversees the regulatory compliance of banking businesses.

• Insurance Business

Insurance companies operating in the UAE must adhere to ESR by engaging in activities like predicting and calculating risks, providing insurance and reinsurance services, and underwriting insurance policies. These core functions ensure that the insurance businesses generate substantial economic activity within the country. The regulatory framework for insurance businesses is maintained by the Insurance Authority and the competent authorities in Free Zones and Financial Free Zones.

3. Investment Fund Management Business

Investment fund management companies need to perform several critical activities to comply with ESR. These activities include making informed decisions on holding and selling investments, calculating risks and reserves, managing currency and interest rate risks, and preparing detailed reports for investors and regulatory bodies. These businesses fall under the supervision of the Securities and Commodities Authority, as well as competent authorities in Free Zones and Financial Free Zones.

4. Lease-Finance Business

Lease-finance businesses must engage in a range of core activities, such as agreeing on funding terms, acquiring and leasing assets, setting terms and durations for financing or leasing agreements, monitoring and revising these agreements, and managing associated risks. These activities ensure that lease-finance businesses generate sufficient economic substance. The UAE Central Bank and the competent authorities in Free Zones and Financial Free Zones oversee these businesses.

5. Headquarters Business

Headquarters businesses are required to perform essential management functions to comply with ESR. These include making significant management decisions, incurring operating expenditures on behalf of group entities, and coordinating group activities. These core functions ensure that the headquarters provides substantial economic contribution. The Ministry of Economy, along with competent authorities in Free Zones and Financial Free Zones, regulates headquarters businesses.

6. Shipping Business

Shipping businesses must undertake various core activities to demonstrate economic substance, such as managing crew (hiring, paying, overseeing), overhauling and maintaining ships, overseeing shipping operations, and managing orders, and deliveries, and organizing voyages. These activities ensure that shipping businesses contribute significantly to the UAE economy. The Ministry of Economy and competent authorities in Free Zones and Financial Free Zones oversee the regulatory compliance of shipping businesses.

7. Holding Company Business

Holding companies must manage activities related to their core functions, which include overseeing and managing their subsidiaries and investments. These companies must ensure they perform these activities to demonstrate a substantial economic presence in the UAE. If your holding company is in any Free Zones such as the Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC), you should also comply with the ESR. The Ministry of Economy and competent authorities in Free Zones and Financial Free Zones regulate holding company businesses.

8. Intellectual Property Business

Intellectual Property (IP) businesses must engage in specific core activities depending on the type of IP assets they hold. For patents or similar assets, activities include research and development, while for marketing intangibles, the focus is on branding, marketing, and distribution. In exceptional cases, strategic decision-making and risk management related to the development and exploitation of IP assets are required. The Ministry of Economy and competent authorities in Free Zones and Financial Free Zones oversee these businesses.

9. Distribution and Service Centre Business

Businesses in the distribution and service center sector must perform key activities such as transporting and storing goods for sale, managing inventories, taking orders, and providing consulting or administrative services. The Ministry of Economy and competent authorities in Free Zones and Financial Free Zones regulate these businesses.

By understanding and adhering to these core activities, businesses can ensure they meet the ESR requirements and maintain compliance with UAE regulations, thereby contributing to the country’s economic growth and stability.

Streamline your Economic Substance Regulation compliance with MS’s expert guidance

Uncertain about the UAE’s Economic Substance Regulations (ESR)? MS can be your single-source solution for smooth compliance. Fretting over deadlines and penalties can hold your business back. MS simplifies ESR for you. Our services cover everything: from identifying if your business even needs to file, to handling the entire filing process efficiently. With MS as your partner, a team of ESR experts ensures your filings meet all requirements. This not only minimizes the risk of penalties but also gives you the peace of mind to focus on growing your business. Don’t let ESR become a hurdle – let MS guide you through the process with confidence.

The UAE implemented the Economic Substance Regulation (ESR) to prevent harmful tax practices and enhance tax transparency, reflecting its commitment as a member of the OECD Inclusive Framework on BEPS (Base Erosion and Profit Shifting). Consequently, mainland, offshore, and free zone companies registered in the UAE must demonstrate adequate economic presence in the country. Businesses engaged in Relevant Activities are required to submit the ES notification and report annually to the authority.

ESR in the UAE explained

ESR requires companies earning income in the UAE to demonstrate they have a substantial base of operations in the country. This translates to having a proportionate level of:

• Infrastructure: Physical office space, equipment, and technology necessary to support the revenue-generating activities.
• Employees: A qualified workforce in the UAE with the expertise to handle the relevant activities.
• Expenditures: Operating expenses commensurate with the level of activity and income generated in the UAE.

The emphasis is on demonstrating a genuine economic connection to the UAE, not just mailbox operation.

Who must comply with ESR in the UAE?

ESR applies to a broad range of entities if they conduct any ‘Relevant Activities’, including:

• 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

Determining your Branch’s ESR Applicability

A meticulous approach is required to determine if your branch falls under ESR. Here’s a more detailed breakdown of the process:

1. Scrutinize Relevant Activities: Carefully examine the list of relevant activities and assess if your branch engages in any of them, even partially.
2. Evaluate Activity Level in the UAE: Conduct a thorough evaluation of your branch’s operations within the UAE. This includes:
   • The number of employees dedicated to the relevant activity in the UAE.
   • The value and location of physical assets used for the activity in the UAE.
   • The overall scale and nature of the relevant activity conducted within the UAE compared to global operations.
3. Verify “Licensee” Status: ESR applies to businesses holding a valid license to operate in the UAE. If your branch has a license, it’s highly likely to be subject to ESR.
4. Explore Exemption Criteria: There are exemptions for certain entities, such as:
   • Branches of foreign businesses that are tax-resident and pay taxes on all relevant income in another jurisdiction.
   • Wholly UAE-owned businesses that operate solely within the UAE and are not part of a multinational group.

It’s crucial to carefully examine the exemption criteria and ensure you meet all the requirements before claiming exemption.

Complying with ESR in the UAE: Reporting requirements

If your branch needs to comply with ESR, you’ll be required to submit reports to the Federal Tax Authority (FTA), the designated authority for collecting ESR information. These reports will detail:

• Branch Information: Legal name, trade name, trade license details, etc.
• Activities: A clear description of the relevant activities undertaken by the branch.
• Financial Information: Financial statements and relevant financial data specific to the branch’s activities in the UAE.
• Employee Details: The number of employees engaged in the relevant activities within the branch.
• Physical Assets: The value and location of any physical assets used by the branch for the relevant activities.
• Core Income-Generating Activities (CIGAs): A clear identification and explanation of the specific activities that generate the relevant income for the branch in the UAE.
• Economic Substance Test Compliance: A confirmation that the branch has met the ESR requirements and any supporting documentation to substantiate this claim.

Penalties for non-compliance with ESR in the UAE

Failure to submit the ES notification: AED 20,000

Failure to submit the ES report: AED 50,000

Failure to submit the ES report for the consecutive year: AED 400,000

Providing inaccurate information: AED 50,000

Remember these Key Points on ESR Filings in the UAE

• ESR applies to all UAE entities conducting relevant activities, not just foreign-owned companies.
• There’s no general exemption for offshore companies; they are subject to ESR if involved in relevant activities.
• Legal documents don’t solely define ESR applicability. A “substance over form” approach prevails, focusing on actual activities.
• Regularly assess your branch’s activities to ensure continuous compliance with ESR.
• Proper documentation is essential when claiming exemptions under ESR.
• ESR filing is mandatory regardless of whether the relevant activity generates income for the branch.
• Penalties exist for non-compliance, including failing to submit notifications and reports or providing inaccurate information.

How MS can help you file ESR in the UAE

Remaining mindful of ESR deadlines is essential to avoid incurring penalties and facing other negative consequences. At MS, we are dedicated to supporting you throughout the entire process. Our efficient and comprehensive services are designed to help you determine if your business engages in Relevant Activities, making ESR filings straightforward and stress-free. By ensuring compliance with all ESR requirements, we can help you prevent any potential penalties.

Don’t let uncertainty hold back your compliance efforts. By partnering with us, you can safeguard your business’s future and maintain its financial health. Our team of experts is ready to provide you with the guidance and support you need to navigate the complexities of ESR regulations the UAE.

Disclaimer

Please be advised that the conditions specified in the register are subject to revisions based on any modifications made to the schedule of contraventions by the UAE authorities. These revisions may arise due to updates in regulatory requirements, policy amendments, or other factors deemed necessary by the UAE Government.