The UAE has been proactive in its commitment to maintaining a transparent and fair tax environment. As part of this commitment, the Economic Substance Regulations (ESR) were introduced to ensure that entities engaging in relevant activities maintain substantial operations within the UAE. This article delves into the latest ESR rules, outlining compliance requirements and how Prism 7 Corporate Services can assist businesses in navigating these regulations. Although the last amendments were now a while ago, we thought it still worth mentioning ESR for new businesses that may not be aware of the requirements.
Economic Substance Regulations (ESR) were initially introduced in the UAE through Cabinet Decision No. 31 of 2019, effective from January 1, 2019. The primary objective was to align with the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and to address concerns from the European Union regarding harmful tax practices. Subsequent amendments were made via Cabinet Decision No. 57 of 2020 and Ministerial Decision No. 100 of 2020, which came into effect on August 10, 2020, and August 19, 2020, respectively.
The most recent amendments have introduced significant changes to the compliance landscape for businesses operating in the UAE. Notably:
Entities must conduct an Economic Substance Test if they are involved in any of the following activities:
Failure to comply with ESR can result in substantial penalties:
Prism 7 Corporate Services offers comprehensive support to ensure your business meets all ESR requirements. Our services include:
Staying compliant with the UAE's Economic Substance Regulations is crucial for avoiding penalties and maintaining business operations. Prism 7 Corporate Services is equipped to guide you through every step of the compliance process, ensuring your business meets all regulatory requirements.
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