Economic Substance Regulations
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Relevant Activities
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As part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of
the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation, the UAE issued Economic
Substance Regulations (Cabinet of Ministers Resolution No. 31 of 2019), (the “Regulations”) on 30 April 2019. Guidance
on the application of the Regulations was issued on 11 September 2019 (Ministerial Decision No. 215 of 2019), and
Cabinet Decision No. 58/2019 on the Determination of Regulatory Competencies lists the Regulatory Authorities tasked
with the administration and enforcement of the Regulations. Amendments to the Regulations were made by Cabinet of
Ministers Resolution No. (57) of 2020 on 10 August 2020, and updated Guidance was issued on 19 August 2020 (Ministerial
Decision No. (100) of 2020 The Regulations require UAE onshore and free zone companies and certain other business forms
that carry out any of the defined “Relevant Activities” listed below to maintain and demonstrate an adequate “economic
presence” in the UAE relative to the activities they undertake (“Economic Substance Test”).
Relevant Activities:
- Banking Business
- Insurance Business
- Investment Fund management Business
- Lease - Finance Business
- Headquarters Business
- Shipping Business
- Holding Company Business
- Intellectual property Business (“IP")
- Distribution and Service Centre Business
The Regulations apply to financial years commencing on or from 1 January 2019. Entities that are within the scope
of the Regulations are required to submit an annual Notification form to their Regulatory Authority , and complete
and submit to the same Regulatory Authority an Economic Substance Report within 12 months from the end of their
financial year (e.g. 31 December 2020 for entities with a financial year ending 31 December 2019). An entity is not
required to meet the Economic Substance Test and file an Economic Substance Report for any financial period in which
it has not earned income from a Relevant Activity or if it meets the conditions for being exempt. A Notification
form will need to be submitted regardless. Failure to comply with the Regulations can result in penalties,
spontaneous exchange of information with the Foreign Competent Authority (as defined in Article 1 of the
Regulations), as well as other administrative sanctions such as the suspension, revocation or non-renewal of the
entity’s trade license or permit.
Terms & conditions to apply in
ESR portal
Notice about COVID-19 in
connection with requests relating to inclusive economic activities (“the regulation of
activities”)
Ministerial Resolution No 129 of
2021 on the formation of ESR Committee
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Economic Substance Regulations Portal Frequently Asked Questions
Economic Substance Regulations Frequently Asked Questions
