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What is the New Economic Substance Regulation and where they apply?

UAE government has introduced the new economic substance regulations on 30th April 2019. Further directions were released on 11 September 2019.

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As you know that UAE is one of the most popular destinations for investors, entrepreneurs, as well as for startups to launch their businesses. Anyhow, According to the European Union (EU) survey, UAE’s tax regulations are not good enough due to which the EU has included the EU in their blacklist. This blacklist is for the no-corporative jurisdictions for tax aspiration. For removing their country name from the blacklist of non-corporative jurisdiction, UAE’s government has presented a brand new Regulations named as Economic Substance Regulations for UAE firms/industries. Seeing that, the audit firms in UAE and tax consultants in UAE are helping organizations to roll over and play with the new structure.

The Economic Substance Regulations were announced on April 30, 2019. Further directions on the application of the Economic Substance Regulations were released on 11 September 2019. By following the new Economic Substance Regulations, UAE is making a positive impact on the EU that will help in removing them from the EU blacklist of non-corporative jurisdictions.

What are Economic Substance Regulations?

The Economic Substance Regulations are done to secure organizations or companies from harmful tax practices just as tricking in tax entities controlling within the country. The main purpose of ESR is to mention about the things involved in the shifting of profits collected from different assets that are not according to the local activities attempt in the countries with low or no corporate taxes. 

Where does Economic Substance Regulations in UAE apply?

When a company or any business in UAE covers one or more “Relevant Activities” listed by the UAE government, here ESR comes in. These activities consist of off-shore, free zone, onshore partnerships, and some other business types that may have a license to work in UAE. Anyway, firms or companies that have purchased at least 51% directly or indirectly via the UAE Government or UAE Authority are cleared from the regulations. 

There are some types of businesses that are treated as “Relevant Activities” and comes under the regulation.

  • Finance Business such as lease
  • Shipping Business
  • Insurance Business
  • Banking Business
  • Investment Fund Management Business
  • Company Holding Business
  • Intellectual Property Business
  • Service Centre and Distribution Business

What are the requirements of any business achieving Relevant Activities?

Filing ESR Returns yearly

All businesses must show the proof of economic substance in UAE and should file an ESR returns within one year or 12 months from the end date of the financial timeline. They are additionally required to meet the Economic Substance Test (EST).

These additional requirements must be noted down with the relevant Regulatory Authority. The Regulatory Authorities set their requirements, deadlines, and different patterns for notification filing. Any kind of delay in the submission of ESR returns and notification forms can cause heavy fines. If you want to avoid all penalties, you can hire a tax consultant in DUBAI. 

Submission of Notification Form to Regulatory Authority 

It is important to note that all the above-mentioned businesses type must have to submit the notification form to the regulatory authority within the prescribed deadline.

If you want to know more about the new Economic Substance Regulations for UAE firms or companies or if you want to get any kind of help related to ESR compliance, you can contact inspire tax consultants and accountants, the leading tax consultants in UAE. 

Our tax expert team will audit the application of the regulation to our organization and will support you via reporting on time.

You can contact with our experts on + (971) 504884714 / + (971) 543353947. You can also mail us at

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