Status checked: 4 November 2026. Economic substance notifications and reports are no longer required for financial years ending after 31 December 2022. Cabinet Decision No. 98 of 2024 changed the reporting scope; obligations and authority requests relating to earlier periods can remain. See the Ministry of Finance’s announcement. The historical requirements below concern financial years ending on or before 31 December 2022 and should not be treated as new annual ESR filing requirements.
Overview of Economic Substance Regulations (ESR)
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 reporting change and the separate corporate tax rules
The ESR reporting change concerns financial years ending after 31 December 2022. It does not remove corporate tax obligations. Qualifying income and the de minimis rules are part of the separate corporate tax framework for Qualifying Free Zone Persons, rather than new ESR reporting requirements.
Historical relevant activities: periods ending on or before 31 December 2022
Under the historical ESR framework, the relevant activities included:
- Banking
- Insurance
- Investment Fund Management
- Lease-Finance
- Headquarters
- Shipping
- Holding Company
- Intellectual Property
- Distribution and Service Centers
Historical ESR compliance requirements
- Economic Substance Notification: Required annually to declare if the business is conducting relevant activities, even if no income was generated from such activities.
- Economic Substance Report: A detailed report demonstrating substantial activities in the UAE, to be submitted if income was earned from relevant activities.
Penalties relating to historical ESR periods
The Ministry of Finance confirms that responsibilities for earlier reporting periods, authority requests and applicable penalties can remain. Check the period and the authority’s current position before assuming a reporting obligation or penalty has been cancelled.
Help with historical ESR matters
If your business has an outstanding ESR matter for a financial year ending on or before 31 December 2022, Prism 7 Corporate Services can help you identify the next steps. Our support includes:
- Impact Assessment: Evaluating how ESR regulations affect your business operations.
- Gap and Remediation Analysis: Identifying compliance gaps and recommending corrective actions.
- Historical Compliance: Reviewing outstanding notifications, reports or authority requests for the relevant earlier reporting period.
Check whether your matter relates to an earlier ESR reporting period or to current corporate tax obligations before deciding what action is needed.
