ESR Notification UAE

Important Update on UAE Economic Substance Regulations

The UAE introduced Economic Substance Regulations to require certain licensees undertaking specified Relevant Activities to demonstrate sufficient economic presence in the country. The framework originally involved an annual Economic Substance Notification and, where applicable, a more detailed Economic Substance Report.

Cabinet Decision No. 98 of 2024 amended the UAE ESR framework. The regulations now apply only to relevant financial years commencing on or after 1 January 2019 and ending on or before 31 December 2022. Therefore, businesses do not need to submit ESR Notifications or Reports for financial years ending after 31 December 2022.

This change does not automatically resolve every historical compliance matter. Businesses with outstanding obligations or correspondence relating to earlier applicable periods should review their records and determine whether further action is necessary.

What Was an ESR Notification?

An Economic Substance Notification was a filing through which a UAE licensee disclosed specified information about its activities and financial period. The notification could include whether the entity conducted a Relevant Activity, whether it generated Relevant Income and whether it claimed an exemption.

The ESR Notification was separate from the Economic Substance Report. A notification identified the entity’s ESR position, while an applicable report contained more detailed information concerning income, expenditure, employees, premises, management and core income-generating activities in the UAE.

Who May Still Need ESR Support?

ESR assistance may still be relevant to a business that operated during an applicable historical period and did not properly assess its activities or complete a required filing. Support may also be needed where a company received an information request, assessment, penalty notice or other authority communication.

Entities undergoing liquidation, restructuring, due diligence, an audit or a change in ownership may need to establish whether historical ESR obligations were completed. A review can also help reconcile inconsistencies between previous notifications, reports, financial statements, trade licences and corporate records.

Our Historical ESR Notification Services

Historical ESR Applicability Assessment

We review the company’s activities, licences, financial periods and available records to identify whether it may have fallen within the ESR framework for an applicable historical year.

Relevant Activity Review

The historical ESR framework covered specified Relevant Activities, including banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property and distribution and service centre businesses. The activity assessment should consider what the company actually performed, not only the wording on its trade licence.

Relevant Income Assessment

Where a Relevant Activity was conducted, the company’s records may need to be examined to establish whether it earned income from that activity during the applicable financial period. This distinction affected the nature of the historical filing requirements.

Exemption Review

Certain entities could qualify as Exempted Licensees subject to the conditions and documentary evidence applicable at the time. We can review the exemption basis previously claimed and whether appropriate supporting records were maintained.

Previous Filing Review

We can compare earlier notifications and reports with financial statements, ownership information and business records. This helps identify missing filings or inconsistencies that may need to be explained or corrected through the appropriate channel.

Authority Correspondence Support

If a business has received a request, assessment or penalty notice concerning an applicable historical period, we can help review the communication and organize the relevant response and supporting documents.

ESR Penalties for Financial Years Ending After 2022

Cabinet Decision No. 98 of 2024 provides for the cancellation of administrative penalties connected with financial years ending after 31 December 2022. Applicable amounts already collected for such periods are also intended to be refunded through the relevant authority process.

This should not be confused with penalties or obligations connected with valid ESR periods ending on or before 31 December 2022. Each notice should be reviewed according to the financial year, alleged violation and status shown in the official records.

Why a Historical ESR Review Still Matters

Unresolved historical compliance issues may become visible during liquidation, ownership changes, regulatory reviews or due diligence. Confirming the company’s position can help management understand whether earlier notifications and reports were properly completed.

A structured review also creates an organized record of the Relevant Activity assessment, income analysis, exemption basis and previous submissions. This documentation can be useful if the business receives a later query concerning an applicable historical period.

ESR and UAE Corporate Tax Are Different

The discontinuation of ESR filings for financial years ending after 2022 does not remove a company’s UAE Corporate Tax responsibilities. Corporate Tax registration, accounting records, return filing, transfer pricing and other obligations are governed by a separate legislative framework.

Businesses should therefore avoid treating the ESR update as a general exemption from tax or regulatory compliance. Their Corporate Tax position should be assessed independently.

Why Choose VAT Accounting UAE?

VAT Accounting UAE provides practical support based on the current ESR position rather than asking clients to complete unnecessary post-2022 filings. We examine the relevant financial period, business activities, previous submissions and authority communication before recommending action.

Our team can also provide coordinated assistance with accounting, VAT, Corporate Tax and transfer pricing matters. This helps connect historical ESR reviews with the company’s financial and tax records.

Our ESR Review Process

We begin by identifying the company’s financial year, licensed activities and the historical period under review. We then examine financial statements, ownership details, previous filings and relevant correspondence.

After completing the assessment, we explain whether the period falls within the historical ESR framework, identify any apparent gaps and recommend suitable next steps. Where required, we assist with documentation and responses to the relevant authority.

Frequently Asked Questions