Economic Substance Regulation Services (ESR)


ESR Summary

ESR Services Brochure

ESR Details/Regulations


ESR Summary

Businesses of UAE -

Are you ready for Economic Substance Regulation (ESR)?

Well, we have experience to do it for you!

Fines for failing to submit notification by 30.06.2020:

AED 10000-50000 ! 


What is ESR?


Economic Substance Regulation (ESR) is a new UAE legislation applicable to all onshore/freezone/offshore companies in UAE carrying on relevant activities. The purpose of the law is to ensure there is economic substance in the country proportionate to the economic activities. This is to prevent businesses to shift base from tax countries to tax havens like UAE without actually shifting economically substantive activities, just to avoid paying taxes. UAE is signatory to and member of The Inclusive Framework on Base Erosion and Profit Shifting (BEPS) that brings together over 135 countries and jurisdictions to collaborate on the implementation of the OECD / G20 BEPS Package.


Is it applicable to your business?


All businesses in UAE, onshore, offshore, freezone, carrying on the relevant activities,  needs to ensure they meet Economic Substance Test (EST) requirements and file notifications by 30.06.2020, failing which fines of AED 10000 – 50000 are applicable (there are escalating fines for other offences related to ESR). Applicable businesses have also to file Economic Substance Return within 12 months of year-end for financial years starting from 1.1.2019.


How can we help you?


Backed by 25 years’ experience as Chartered Accountants in Auditing, VAT Services, Business Setup and other professional services, together with its associated companies, Kant & Clients can provide you professional services to meet these requirements as under:


Economic Substance Regulation (ESR) Services


  • Basic Assessment to check the applicability of ESR to your business
  • Advanced Assessment to check the applicability of ESR to your business (if Basic Assessment is affirmative)
  • Helping you file ESR Notifications with the relevant Authority, as per the trade license type (LLC, Freezones, Offshore, etc)
  • Review of ESR Gross Revenues and other data required to be submitted in ESR Returns
  • Helping you in preparing and file ESR Returns
  • Statutory Audits & Report, disclosing ESR related and other Gross Revenues and other data, providing reconciliation with ESR Returns, to ensure there is no discrepancy
  • Consulting on all matters related to ESR


Why Us?


  • Kant & Clients, together with its associated companies Emirates Business Management (EBM), and Visual ACE Business Solutions, can deliver a full range of professional services - Audit, VAT, ESR, Business Set-up, ERP, Accounting, etc.
  • Experience with 3000 clients in 30 countries for 25 years
  • Legally registered External/Statutory Auditors
  • Integrated Business Excellence Services – ISO, TQM, EFQM, DQA, Consulting for HR/Marketing


Contact us for more details:



Tel: 04-2237270 Mobile: 050-4567077


ESR Services Brochure

ESR Details/Regulations

Economic Substance Regulations

As part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union (“EU”) Code of Conduct Group on Business Taxation, the UAE introduced a Resolution on the Economic Substance (Cabinet of Ministers Resolution No.31 of 2019, the “Regulations”) on 30 April 2019.  Guidance that provides further clarity on the application of the Regulations was issued on 11 September 2019. The Regulations require UAE onshore and free zone companies and other UAE business forms that carry out any of the “Relevant Activities” listed below to maintain an adequate “economic presence” in the UAE relative to the activities they undertake. 

Relevant Activities:
  • Banking Business
  • Insurance Business
  • Investment Fund management Business
  • Lease - Finance Business
  • Headquarters Business
  • Shipping Business
  • Holding Company Business 
  • Intellectual property Business (“IP")
  • Distribution and Service Centre Business
The Regulations provide a definition to each of the above Activities. The provisions of the Regulations shall not apply to Companies in which the Federal Government of the UAE or the Government of any Emirate of the UAE, or any governmental authority or body or any of them has at least 51% direct or indirect ownership in their share capital. The Regulations apply to financial years commencing on or from 1 January 2019. Entities that are governed by the Regulations will need to submit a notification to their Regulatory Authority (defined under Cabinet Decision No (58) of 2019 issued on 4 September 2019) from 1 January 2020 onwards, and prepare and submit to the same Regulatory Authority an economic substance declaration  within 12 months from the end of their financial year (e.g. 31 December 2020 for entities with a financial year ending 31 December 2019). An entity is not required to meet the economic substance test and file an economic substance declaration for any financial period in which it has not earned income from a Relevant Activity. Failure by an entity to comply with the Regulations shall result in administrative penalties, spontaneous exchange of information with the Foreign Competent Authority (as defined in Article 1 of the Regulations), and potential suspension, revocation or non-renewal of its registration.


 Economic Substance Relevant Activities Summary

 Economic Substance UAE Economic Substance Flowchart

 Ministerial decision no. 215 for the year 2019

 Relevant Activities Guide

 Ministerial decision no. 215 for the year 2019

 COVID – 19 Industry Advisory Notification

The Economic Substance Regulations

1.Why has the UAE introduced Economic Substance Regulations?

The UAE introduced Economic Substance Regulations to honour the UAE’s commitment as a member of the OECD Inclusive Framework on BEPS, and in response to a review of the UAE tax framework by the EU which resulted in the UAE being included on the EU list of non-cooperative jurisdictions for tax purposes (EU Blacklist). The issuance of the Economic Substance Regulations on 30 April 2019 (the Regulations), and the subsequent release of the Guidance on the application of the Regulations on 11 September 2019, was a requirement for the removal of the UAE from the EU Blacklist on 10 October 2019. The purpose of the Regulations is to ensure that UAE entities that undertake certain activities (see question 4) are not used to artificially attract profits that are not commensurate with the economic activity undertaken in the UAE.

2.What is the first reportable Financial Year?

The Regulations apply to financial years starting on or after 1 January 2019. Example 

1: A UAE company with 1 January 2019 - 31 December 2019 financial year: First assessable period would be 1 January 2019 - 31 December 2019. Example 

2: A UAE company with 1 April 2019 - 31 March 2020 financial year: First assessable period would be 1 April 2019 - 31 March 2020. No need to comply with the Regulations for the period 1 January 2019 - 31 March 2019.

3.Who are the “Regulatory Authorities”?

The Regulations are administered by the Regulatory Authorities listed in Cabinet Resolution No (58) of 2019 Determining the Regulatory Authorities Concerned with the Business Mentioned in Cabinet Resolution No (31) of 2019 Concerning Economic Substance Regulations (link below) Cabinet Resolution Number 58 of 2019

Copyright © 2019