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Economic Substance Regulations (ESR) in the UAE
The UAE introduced Economic Substance Regulations in 2019 under Cabinet Resolution No. 31 of 2019. They required onshore and free zone businesses carrying out certain “Relevant Activities” to show adequate economic presence in the UAE.
That changed in 2024. Under Cabinet Decision No. 98 of 2024, ESR reporting no longer applies to financial years ending after 31 December 2022, as the UAE now relies on its Corporate Tax regime. Obligations for earlier years still matter, though. At Hussain Al Shemsi Chartered Accountants, we help businesses close out their ESR history and manage substance under Corporate Tax.
UAE ESR at a glance
- Introduced: Cabinet Resolution No. 31 of 2019, later replaced by Cabinet Resolution No. 57 of 2020.
- Now: Cabinet Decision No. 98 of 2024, effective 2 September 2024, removed ESR obligations for financial years ending after 31 December 2022.
- Fines for later years: ESR fines issued for financial years ending after 31 December 2022 are cancelled, and fines already paid are refundable through the Federal Tax Authority (FTA).
- Earlier years: filings and penalties for financial years up to 31 December 2022 still stand and can be reviewed.
- Substance today: substance matters under Corporate Tax, especially for Qualifying Free Zone Persons and tax residency.
How can we help you?
Get in touch with Hussain Al Shemsi Chartered Accountants for expert auditing, accounting, tax, and advisory services in the UAE.
- +971 50 3636231
How We Help Now
ESR status review
Checking which financial years, if any, still carried ESR obligations for your business and whether they were met.
Earlier-year notifications and reports
Completing or correcting outstanding ESR filings for financial years up to 31 December 2022.
Penalty reconsideration and appeals
Reviewing ESR penalties and preparing reconsideration requests or appeals where they were wrongly imposed.
Refunds of cancelled fines
Helping you claim back ESR fines paid for financial years ending after 31 December 2022.
Substance for Qualifying Free Zone Persons
Reviewing whether your free zone company has adequate substance for the 0% Corporate Tax rate.
Tax residency and substance
Supporting UAE tax residency certificate applications that depend on real presence in the UAE.
Who Should Review Their ESR Position?
- Businesses that carried out Relevant Activities between 2019 and 2022
- Companies that missed an ESR notification or report for an earlier year
- Businesses that received ESR penalties they believe are wrong
- Companies that paid ESR fines for financial years ending after 31 December 2022
- Free zone companies relying on Qualifying Free Zone Person status
- Groups applying for UAE tax residency certificates
Our Process
- Review: we confirm your licences, activities and financial years from 2019 onwards.
- Check filings: we compare what was filed with what was required for each year.
- Resolve: we prepare outstanding filings, reconsideration requests, appeals or refund claims.
- Plan ahead: we review your substance under Corporate Tax and free zone rules.
- Keep records: we organise the evidence you need if the FTA asks questions later.
Why Choose Hussain Al Shemsi
- ESR, Corporate Tax and audit experience together, so old filings and new obligations line up. See our Corporate Tax services.
- Clear advice on what still applies and what no longer does.
- Practical help with FTA correspondence, appeals and refunds.
- Based in Sharjah, supporting mainland and free zone businesses across the UAE.
Frequently Asked Questions
Do UAE businesses still need to file ESR reports?
Not for financial years ending after 31 December 2022. Cabinet Decision No. 98 of 2024 removed ESR obligations for those years.
What about ESR obligations for 2019 to 2022?
They still apply. Filings and penalties for financial years up to 31 December 2022 remain valid and can be reviewed by the authorities.
We paid an ESR fine for 2023. Can we get it back?
Fines paid for financial years ending after 31 December 2022 are refundable. We can help you prepare and follow up the refund request with the FTA.
Can ESR penalties for earlier years be challenged?
Yes, where there are grounds. We review the penalty and the filing history, and prepare a reconsideration request or appeal where appropriate.
Does substance still matter after ESR?
Yes. Substance remains important under Corporate Tax, including for Qualifying Free Zone Persons and for tax residency certificates.
What were the Relevant Activities under ESR?
Banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution and service centre businesses.
Which authority deals with ESR now?
The Federal Tax Authority handles ESR matters, including refunds of cancelled fines.
Close Out Your ESR History
Talk to our team about earlier-year filings, penalties or refunds, and your substance under Corporate Tax.
Official guidance: Ministry of Finance announcement on Cabinet Decision No. 98 of 2024.
