The UAE has enacted Economic Substance regulations through several Cabinet of Ministers Resolutions. The Regulations and guidance apply in all UAE jurisdictions, including financial free zones. In accordance with the ESR regulations & amended guidance, all firms that conduct one or more “Relevant Activities” are required to submit an Economic Substance Notification (Notification) and/or an Economic Substance Report (Report).

Exempted Licensee is required to file a Notification on but is not required to file a Report.

The following entities are considered to be “Exempt Licensees” under the Amended ESR and are not required to file a Report:

  • Entities that are tax resident outside the UAE
  • Investment Funds;
  • Entities that are wholly owned by UAE residents, that:
    • are not part of a multinational group; and
    • only carry out business activities in the UAE;
  • A branch of a foreign entity whose relevant income is subject to corporate tax in a jurisdiction other than the UAE.

Exempted Licensees are not required to file a Report but are required to file a Notification, to confirm and substantiate their exempt status.

What is the Economic Substance Test?

The Economic Substance Test requires firms to demonstrate that:

 The relevant Core Income Generating Activities (CIGAs) are being conducted in the UAE;
 The entity and the Relevant Activity are being directed and managed in the UAE;
 The entity has adequate employees, premises and expenditure in the UAE.

The Filing Date for the Economic Substance Notification and Report is as follows:

 Notification: The later of six months after the financial year end
 Economic Substance Report: The later of 12 months after the financial year end

Avoid Penalties!

 Failure to submit the ESR Notification – AED 20,000
 Failure to submit the ESR Report – AED 50,000

For filing your Economic Substance Notification and Report, we are here to help you to comply with the reporting requirements in efficient & professional manners.

Contact YAG Accounting & Tax Consultancy for assistance today!