ESR stands for Economic Substance Regulations, a set of regulations introduced to ensure that companies operating within the UAE demonstrate genuine economic activities and substance within the country. The ESR Regulations are implemented by the international standard established by the Organisation for Economic Cooperation and Development Forum on Harmful Tax Practices. This standard mandates that entities engaged in business activities that can easily relocate geographically must demonstrate significant operational presence in a particular jurisdiction.

Business entities under the purview of ESR in UAE must strategize and prepare for the annual ESR notification and reporting processes. Additionally, they must adhere to the stipulated criteria for the UAE Economic Substance Test, seeking expert assistance from reputable ESR service providers.


ESR applies to all UAE onshore and free zone companies across various sectors, including:

  • Banking Business
  • Insurance Business
  • Investment Fund Management Business
  • Lease-finance Business
  • Distribution & Service Centre Business
  • Headquarters Business
  • Shipping Business,
  • Holding company Business
  • Intellectual property Business

Should a licensee engage in a relevant activity mentioned above, it is incumbent upon them to thoroughly assess the specific requirements outlined for such activities under the ESR UAE Regulations.

Companies falling within the scope of the ESR UAE need to meet specific economic substance requirements, which include conducting core income-generating activities within the UAE, having an adequate number of qualified employees, incurring sufficient operating expenditures, and maintaining physical assets in the UAE. Companies subject to ESR must submit an annual notification to their regulatory authority, providing details on their activities and whether they meet the economic substance requirements. Additionally, entities that generate income from relevant activities need to file a detailed economic substance report annually.

ESR is crucial for maintaining a fair and transparent business environment in the UAE. Companies subject to ESR regulations must carefully plan and execute annual ESR UAE notification and reporting procedures


ESR in UAE aims to ensure that businesses engage in actual economic activities. By requiring companies to have substantial operations and economic substance in their jurisdictions, ESR helps promote fair taxation and transparency in the global business environment.

Gathering and providing data necessary for both the Regulatory Authority and the National Assessing Authority to oversee the engagement in a Relevant Activity and ensure compliance with the ESR Regulations is pivotal for monitoring and enforcing the provisions of the ESR UAE Regulations.

The National Assessing Authority and Regulatory Authorities in the UAE can work in collaboration with any ministry or administrative body to gather necessary information about a Licensee or an Exempted Licensee for enforcing the ESR Dubai Regulations. As per the ESR Regulations, each regulatory authority must provide copies of the information received to the Ministry of Finance when requested. Additionally, it is the responsibility of the National Assessing Authority to notify the Competent Authority about any Licensee who fails to pass the Economic Substance Test for any Relevant Activity.

If the National Assessing Authority finds out that a Licensee or an Exempted Licensee has failed to comply with the provisions mentioned in the ESR Dubai Regulations, it has the power to impose various administrative penalties as described in Articles 13, 14, and 15 of the ESR Regulations. Generally, these administrative penalties are subject to a time limit of six (6) years.

Non-compliance with the Economic Substance Regulations can lead to various penalties, encompassing fines, suspension, or potentially result in the company's deregistration. Companies should seek guidance from legal and tax advisors to assess their obligations under the ESR UAE and implement necessary measures to achieve compliance.

A Licensee has the right to appeal a decision by the National Assessing Authority on several grounds, including contesting that it did not commit a violation, informing that the penalty levied is disproportionate to the violation, or asserting that the administrative penalty exceeds the prescribed limit. Licensees can initiate appeals through formal procedures outlined within the regulatory framework.


Amidst uncertainties surrounding the Economic Substance Test requirements, Excellence aims to serve as a trusted resource, offering comprehensive guidance on fulfilling the ESR UAE Test Requirements. With our dedicated team of experts, we provide clarity and support to businesses navigating through the complexities of ESR UAE compliance, ensuring smooth adherence to regulatory standards and fostering long-term success.

Backed by a team of proficient experts committed to excellence, our company ensures that your business is equipped with the expertise needed to meet the ESR UAE requirements seamlessly. We understand that staying compliant with ESR regulations in the UAE can be daunting, but with our guidance, you can confidently navigate through the process.

Our specialists are dedicated to delivering tailored solutions crafted to align perfectly with your unique needs and requirements, guaranteeing compliance and optimizing your business operations for long-term success. We recognize the importance of having a reliable partner to assist you in ESR reporting, and we are here to offer our unwavering support every step of the way.


  • What is ESR in UAE for?

    ESR stands for Economic Substance Regulations, crafted to guarantee that companies functioning within the UAE demonstrate genuine economic activities and substance within the country.

  • Who implements the ESR in UAE?

    The ESR Regulations in UAE are implemented based on the international standard established by the (OECD) Organisation for Economic Cooperation and Development Forum on Harmful Tax Practices.

  • Which sectors do the ESR regulations apply to in UAE?

    ESR regulations apply to various sectors in the UAE, including banking, insurance, investment fund management, lease finance, distribution & service centers, headquarters, shipping, holding companies, and intellectual property businesses.

  • What are the requirements of the Economic Substance Test under ESR Dubai?

    To demonstrate adequate substance in the UAE, a Licensee must meet specific criteria, including conducting Core Income-Generating Activities (CIGAs) in the UAE and maintaining appropriate resources such as qualified employees, operating expenditures, and physical assets. These requirements vary based on the nature and level of the Relevant Activity.

  • What are the consequences of non-compliance with ESR in UAE?

    Non-compliance with ESR can lead to penalties such as fines, suspension, or even company deregistration.

  • Who needs to file annual notifications and reports under ESR Dubai?

    Companies subject to ESR regulations in Dubai and the UAE must submit annual notifications to their regulatory authority, providing details on their activities and whether they meet the economic substance requirements. Additionally, entities generating income from relevant activities must file detailed economic substance reports annually.

  • How does liquidation or cessation of Relevant Activities affect ESR compliance in UAE?

    Entities undergoing liquidation or ceasing Relevant Activities in the UAE must adhere to ESR Regulations as long as they exist. They must ensure compliance with the Economic Substance Test during the liquidation process, meeting all obligations and reporting requirements outlined under the ESR Regulations.

  • What assistance does Excellence offer regarding ESR in UAE?

    Excellence offers comprehensive guidance on fulfilling ESR Test Requirements in the UAE, ensuring seamless compliance with ESR UAE regulations.

  • How does Excellence help businesses navigate through ESR compliance in the UAE?

    Backed by a team of proficient experts dedicated to Excellence, Excellence provides tailored solutions to cater to the distinct needs and specifications of businesses in the UAE, guaranteeing compliance and optimizing operations for long-term success.

  • Why is it essential to seek guidance on ESR compliance?

    Given the complexities surrounding ESR regulations in UAE, seeking guidance from legal and tax advisors is crucial for companies to understand their obligations and implement necessary measures for compliance.

  • What role does Excellence play as a reliable partner in ESR reporting in UAE?

    Excellence serves as a trusted resource and partner for businesses in UAE, offering unwavering support throughout the ESR reporting process, ensuring compliance, and providing expert guidance to navigate uncertainties surrounding ESR regulations.

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Affiliation1 | ESR Dubai | ESR UAE
Affiliation2 | ESR Dubai | ESR UAE
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