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Economic Substance Regulation (ESR)

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Economic Substance Regulation (ESR)

In line with its membership in the OECD Inclusive Framework and in response to the assessment of the UAE's tax framework by the European Union Code of Conduct Group on Taxation, the UAE Government issued guidance on the application of Economic Substance Regulations (ESR) in September 2019. This guidance stipulates that businesses involved in activities such as Banking, Insurance, Investment Fund Management, Leasing, Headquarters, Holding Company, Shipping, Intellectual Property (IP), and Distribution & Service Centre must maintain and demonstrate adequate "economic presence" in the UAE relative to their activities, as outlined in the Economic Substance Test. These regulations have been in effect since January 1, 2019.

Entities that meet the Economic Substance Test must provide the following documents to their relevant regulatory authority:

  • Annual notification form
  • Economic Substance Report within 12 months from the end of their financial year

Entities that are exempt or haven't generated income from relevant activities in a financial year are not obligated to submit the Economic Substance Report. Nevertheless, they are still required to submit the Annual Notification Form to their respective regulatory authority.

In 2019, JASM experts diligently submitted Annual Notification Forms and Economic Substance Reports to UAE authorities on behalf of our clients. We take pride in the appreciation received from our clients for the professional services rendered to their respective authorities. Our commitment lies in ensuring our clients' trust by delivering accurate reports to the authorities, while maintaining adherence to professional standards and ESR requirements.