Economic Substance Regulations Compliance Services UAE
The Economic Substance Regulations (ESR) in the UAE is a set of guidelines and requirements issued by the Ministry of Finance to ensure that companies conducting certain business activities in the UAE have an adequate level of economic substance and are not merely being used as a means of tax avoidance.
In April 2019, the UAE released economic substance regulations (the “Regulations”). These were later amended in August 2020 through Cabinet Resolution No.57. The Regulations require UAE entities to establish a sufficient “economic presence” in the UAE corresponding to their business activities. All UAE onshore and free zone companies, as well as some other business forms, are subject to the UAE economic substance requirements if they engage in one or more “Relevant Activities” starting from financial years that begin on or after January 1, 2019.
The regulations apply to companies engaged in specific activities such as banking, insurance, investment fund management, shipping, and intellectual property. Companies must demonstrate that they have sufficient employees, physical assets, and management presence in the UAE to carry out their business activities.
Entities that qualify for “exempt” status are not obligated to prove economic presence in the UAE. Nonetheless, they must submit a Notification and furnish adequate evidence to substantiate their exempt classification. Failure to comply with the ESR could result in penalties and other consequences. Are you struggling to understand the nuances of economic substance regulations in the UAE? Horizon Biz Consultancy can simplify the process for you and provide clear, actionable steps to
achieve compliance. You can book your free consultation with our experts today.
