ESR Filing in UAE
The new Economic Substance Regulations (ESR) for UAE companies were enforced by Cabinet of Minister Resolution No. (31) in April 2019. ESR was introduced to improve the tax framework and ensure that companies maintain a genuine economic presence in the UAE.
Complying with ESR requirements can be challenging, especially for businesses without in-house teams or the required knowledge. Non-compliance may result in penalties ranging from AED 20,000 to AED 400,000 or suspension of your UAE license.
At Smart Business Creation, we provide ESR compliance services to help you avoid such penalties and maintain your company’s reputation.
Why Were Economic Substance Regulations Introduced in the UAE?
The primary goal of introducing ESR in the UAE was to ensure that businesses, particularly multinational organizations, are not shifting profits to the UAE solely to benefit from tax advantages without conducting substantial activities. Companies that register in Dubai solely to exploit the tax laws, without contributing to the country’s economic growth, are being addressed with these regulations.
Here are key reasons for implementing ESR in the UAE:
1. Comply with Global Anti-Money Laundering Regulations
ESR helps align Dubai’s efforts with global anti-money laundering regulations. This enables greater transparency and accountability, curbing illegal activities such as money laundering.
2. Curtail Harmful Tax Practices
ESR eliminates harmful tax practices that companies have used to artificially reduce tax liabilities. All eligible Onshore and Free Zone companies must now demonstrate economic presence in the UAE, promoting fair tax competition.
3. Eliminate Shell Companies
ESR eliminates shell companies that exist only on paper, with no actual economic activity. Companies that fail the ESR assessment may face penalties, including license revocation.
4. Supervise Relevant Activities
ESR allows authorities to monitor and regulate activities that impact the UAE’s economy. Companies engaged in specific Relevant Activities must submit ESR reports in the UAE.
List of Relevant Activities:
- Insurance & Banking Business
- Lease Finance Business
- Shipping Business
- Distribution and Services
- Investment Fund Management Business
- Holding Company
- Company Headquarters
- Intellectual Property Rights
Step-by-Step Guide to ESR Return Submission in the UAE
Businesses subject to ESR must file and submit their ESR notification form each year to the relevant regulatory authority. Additionally, businesses must submit their ESR reports within 12 months after their financial year ends.
Even if a business does not generate income from Relevant Activities or qualifies for exemptions, they must still submit the notification form.
Non-compliance may result in:
- ESR penalties
- Sharing of information with foreign authorities
- Additional penalties, including the suspension or cancellation of trade licenses.
ESR Penalties in the UAE
The penalties for non-compliance with ESR filing deadlines are steep:
- Failure to submit ESR Notification: AED 20,000 penalty.
- Failure to submit an Economic Substance Report: AED 50,000 penalty.
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Exceptions to ESR Regulations in the UAE
Some entities are exempt from filing ESR, including:
- Entities solely owned by UAE residents that are not part of a multinational group and conduct economic activities in the UAE.
- Licensees or tax residents outside the UAE.
- Investment funds.
- Branches of foreign companies subject to tax outside the UAE.
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Why Choose Smart Business Creation for ESR Assessment & Return Filing in Dubai?
Smart Business Creation is your trusted partner for all ESR assessment and return filing requirements. We help you:
- Determine your eligibility.
- File an ESR notification.
- Submit your ESR report.
- Complete ESR tests and maintain proper documentation.
Our Services Include:
- On-time ESR notification filing.
- Expert PR consultants, lawyers, and tax professionals.
- Advisory services on ESR Notification Filing.
Still unsure about your decision? Book a Consultation
Expertise
Our team of ESR submission experts is always available to answer your questions and provide guidance on Economic Substance Regulations in the UAE.
Ease
We ensure that your organization complies with all ESR requirements, avoiding any penalties.
Clarity
We guarantee that your ESR notification is filed before the deadline, so you don’t face penalties.
