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Economic substance regulations (ESR) in the UAE have been switched off for recent years. Companies do not file ESR notifications or ESR reports for any financial year ending after . That change came through Cabinet Decision No. 98 of , announced by the Ministry of Finance on . The duties for earlier financial years were not cancelled.
UAEFreeZoneDirectory.com is an independent free zone directory, not a tax authority or a tax adviser. Read this as a summary and check your own position with a professional.
What changed
| Financial year | ESR notification | ESR report |
|---|---|---|
| Ends on or before | Rules still apply | Rules still apply |
| Ends after | Cancelled | Cancelled |
Source: Ministry of Finance announcement on the amendment to the Cabinet decision on economic substance requirements, checked .
The test is the end date of the financial year, not the date you file. A company with a calendar year has nothing to file for the year ending on or any year after. A company with a June year end still had ESR duties for its year ending .
Who this affects
New free zone companies. If your licence is recent, every financial year you have ends after the cut off. ESR does not touch you. Many older articles and agency pages still list ESR as a yearly task. They are out of date.
Older companies with clean records. If you filed everything up to and including your last financial year ending on or before the cut off, there is nothing more to do for ESR.
Older companies with gaps. This is the group the change did not help. A missed notification or report for an earlier year is still an open obligation. Do not assume the cancellation wiped it. Pull your filing history and speak to a tax adviser before you sell, restructure or liquidate the company, because buyers and liquidators will ask.
What to do now
- Find your financial year end on your licence or in your accounts.
- List every financial year that ended on or before .
- For each of those years, check whether an ESR notification and, where needed, a report was filed.
- If anything is missing, get advice on the old years. Keep the records either way.
- Remove ESR from your yearly compliance calendar for later years.
The filings that matter now
ESR has gone for recent years, but the compliance calendar of a free zone company is not lighter. These are the items that now carry the deadlines:
- Corporate tax registration, within 3 months of incorporation, with an AED 10,000 penalty if late. See corporate tax registration.
- Corporate tax returns, within 9 months of each year end.
- Audited statements if you claim the 0% rate as a qualifying free zone person. See audit for free zone companies.
- The UBO register, filed with your zone and updated within 15 days of a change. See the UBO register guide.
- VAT registration once taxable supplies pass AED 375,000. See VAT registration.
All of them depend on records kept through the year. Our bookkeeping page explains what that costs.
ESR and the free zone corporate tax conditions
People mix these up. ESR was a reporting regime: a notification, and for some companies a report, filed each year. It no longer applies to recent years.
The 0% corporate tax rate for a qualifying free zone person is a different thing. It depends on conditions set in the Corporate Tax Law, Cabinet Decision No. 100 and a Ministerial Decision. Fail one in a tax period and the company loses the status for that period and the next four. Ask an adviser to check your activities and setup against those conditions. Do not rely on an old ESR assessment for the answer.
An old ESR file can still help in one way. If you prepared one, it describes your activities, staff and premises in the UAE. That is useful background for the adviser, even though the test it was written for has ended.
Why older guides still mention ESR
Many setup agency pages and checklists were written while ESR applied, and they were never updated. If a provider quotes you an ESR filing fee for a year that ended after the cut off, ask which rule they are relying on. For the years that are still covered, the work is a catch up job on old records, so expect the provider to ask for accounts and ownership details for those years.
Sources
- https://mof.gov.ae/en/news/ministry-of-finance-announces-amendment-to-cabinet-decision-on-economic-substance-requirements/ (cancellation, scope and earlier years)
- https://mof.gov.ae/en/public-finance/tax/corporate-tax/ (corporate tax return deadline)
- FTA public clarification TAXP010 (qualifying free zone person conditions)
