The United Arab Emirates (UAE) implemented the Economic Substance Regulations (ESR) in 2019 as a part of their efforts to enhance transparency and align the UAE’s tax framework with international standards.
The ESR applies to mainland and free zone legal entities engaged in relevant activities, such as banking, insurance, fund management, leasing, headquarters, shipping, holding company, intellectual property and distribution and service center activities. These entities are required to demonstrate genuine economic presence in the UAE like having sufficient employees, physical office facilities, appropriate levels of expenditure within the country and show that their activities are not solely driven by tax considerations. They must file an economic substance notification and report annually to confirm compliance with the ESR. Failure to comply may result in financial penalties and the suspension of the business license.
The ESR aims to ensure fairness, transparency and compliance within the UAE’s business ecosystem. By abiding with the ESR regulations, businesses can contribute to the UAE’s efforts in maintaining its position as an attractive global business destination.
Do you have a company and you are a business owner in the UAE? Need more information about ESR and how it applies to your business in the UAE? Drop us an email (office@alphaprimedwc.ae) or give us a call (+971 58 515 2374) at any time for assistance to ensure your compliance with the ESR.
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