ESR Filing UAE

Current Status of ESR Filing in the UAE

The Economic Substance Regulations previously required certain UAE licensees carrying out Relevant Activities to evaluate and demonstrate their economic presence in the country. Depending on their activities, income and exemption status, affected entities could be required to submit an ESR Notification and a detailed Economic Substance Report.

Cabinet Decision No. 98 of 2024 limited the application of the regulations to financial years commencing on or after 1 January 2019 and ending on or before 31 December 2022. Consequently, financial years ending after 31 December 2022 do not require an ESR Notification, Economic Substance Report or demonstration of the Economic Substance Test under that regime.

Businesses should therefore avoid submitting unnecessary ESR filings for later periods. However, unresolved obligations connected with a valid historical period should not be ignored.

What Was an Economic Substance Report?

An Economic Substance Report was a detailed annual filing used to provide information about a licensee’s Relevant Activity and its economic presence in the UAE. It generally contained financial and operational information connected with the Relevant Income earned during the applicable reporting period.

The report could include details concerning income, expenditure, assets, employees, premises, management and core income-generating activities. The information enabled the relevant authorities to assess whether the licensee met the applicable Economic Substance Test.

ESR Notification vs Economic Substance Report

The ESR Notification and Economic Substance Report were separate submissions. The notification generally identified whether the licensee conducted a Relevant Activity, generated Relevant Income or claimed an exemption.

The Economic Substance Report was more detailed and generally applied where an entity conducted a Relevant Activity and earned Relevant Income without qualifying for an applicable exemption. Filing a notification did not automatically satisfy a separate obligation to submit the report.

This distinction remains important when reviewing historical compliance because a business may have submitted its notification but failed to complete an applicable Economic Substance Report.

Our Historical ESR Filing Services

Financial Period Assessment

We first identify the company’s financial year and determine whether the period falls within the historical ESR framework. Financial years ending after 31 December 2022 do not require a new ESR filing under the amended regulations.

Relevant Activity Review

We review the company’s actual operations, contracts, income and licences to evaluate whether it conducted a Relevant Activity during an applicable period. The assessment should be based on business activity rather than the trade licence description alone.

Relevant Income Analysis

If the business conducted a Relevant Activity, we examine whether income was generated from that activity. Financial statements, ledgers, agreements and supporting records may be needed to establish the correct historical position.

Economic Substance Test Review

Where applicable, we review information concerning management and direction in the UAE, core income-generating activities, employees, operating expenditure, physical assets and premises. The review is tailored to the Relevant Activity and historical reporting period.

Previous Notification and Report Review

We compare earlier ESR submissions with financial statements, ownership information and business records. This can identify inconsistent information, missing reports or areas requiring additional supporting documentation.

Authority Query and Penalty Support

Where an entity has received an information request, assessment or penalty notice, we can help review the communication and organize the available records. The required response depends on the applicable period and specific issue identified by the authority.

Relevant Activities Under the Historical ESR Framework

The historical regulations identified banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property and distribution and service centre businesses as Relevant Activities.

A company did not necessarily fall within ESR simply because its licence contained broadly similar wording. Conversely, a business could not necessarily avoid an assessment because the activity was not clearly stated on its licence. Its actual transactions and operations needed to be considered.

Information Required for a Historical ESR Review

Documents may include the trade licence, constitutional records, financial statements, general ledger, contracts, ownership details, employee records, premises information and evidence of management decisions. Copies of previous ESR Notifications, Economic Substance Reports and authority correspondence should also be provided where available.

The exact information required depends on the Relevant Activity, financial period and compliance issue. Providing consistent records allows the historical position to be assessed more accurately.

Penalties Relating to Post-2022 Financial Years

Cabinet Decision No. 98 of 2024 provides for administrative penalties imposed in connection with financial years ending after 31 December 2022 to be cancelled. Amounts collected in relation to those periods are also intended to be refunded through the relevant authority process.

Penalties connected with valid historical ESR periods ending on or before 31 December 2022 require separate evaluation. Businesses should review the financial year and violation stated on each notice before determining the appropriate response.

Why Historical ESR Compliance Still Matters

An unresolved filing may become relevant during liquidation, a regulatory review, due diligence, restructuring or a business sale. Historical issues can also arise when company records show that an ESR Notification was submitted but the corresponding report cannot be located.

A professional review helps management establish which periods were applicable, what was previously submitted and whether further action or documentation may be required.

Why Choose VAT Accounting UAE?

VAT Accounting UAE applies the current legal position and will not recommend unnecessary ESR filings for periods ending after 2022. We focus on identifying genuine historical obligations and organizing the financial and operational information relevant to the assessment.

Our team can also provide coordinated support with accounting, Corporate Tax, VAT and transfer pricing matters. These services are separate from ESR but may rely on many of the same financial and business records.

Our ESR Filing Review Process

We begin by establishing the company’s financial periods, business activities and filing history. We then review financial statements, income sources, operational records and any authority communications.

After completing the review, we explain whether an applicable historical obligation appears to exist, identify gaps in the available records and recommend suitable next steps. Where required, we assist with supporting schedules and responses to the relevant authority.

Frequently Asked Questions