Economic substance regulations in the UAE: are they still required?

Is ESR still required in the UAE?

Cabinet Resolution No. 98 of 2024, issued on 2 September 2024, added Article 2 bis to Cabinet Resolution No. 57 of 2020: the ESR applies to financial years from 1 January 2019 up to and including the financial year ending on 31 December 2022. The Ministry of Finance confirmed on 14 October 2024 that no ESR notifications or reports are needed for financial years ending after that date.

So a financial year from 1 July 2022 to 30 June 2023, which ends after the cut-off, needs no ESR filing. The u.ae ESR page (updated 28 October 2026) still describes yearly filing without the cut-off; the Cabinet Resolution is the legal text, so follow it.

What the ESR required for 2019 to 2022

The ESR covered mainland and free zone licensees that carried on one of nine relevant activities in Article 3 of Cabinet Resolution No. 57 of 2020: banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution and service centre business.

Licensees with relevant income had to pass the Article 6 substance test: carry on the core income-generating activity in the UAE, direct and manage it here, and have adequate qualified full-time employees, operating expenditure and physical assets.

• Notification (the licensee). Filed yearly with the regulatory authority, through the Ministry of Finance ESR portal (Article 8). The Ministry of Finance's guidance and the Ministry of Economy and Tourism's ESR page say six months after the financial year end; the Ministry of Finance's current ESR page and u.ae say 12 months.
• Report (the licensee). Due within 12 months of the financial year end if the licensee had relevant income (Article 8(4)).
• Assessment (the FTA). As National Assessing Authority, the FTA could decide a year up to six years after it ended (Article 7(1)).

The notification asked for ownership details, including ultimate beneficial owners. Resolution No. 98 of 2024 amends only the ESR, so beneficial ownership filings are a separate duty; see our guide to ultimate beneficial owner rules.

ESR penalties and what happens to them now

Most penalties can't be imposed more than six years after the violation; for inaccurate information, the limit is 12 months from when the FTA learns of it (Article 16). For financial years ending after 31 December 2022, Article 2 of Resolution No. 98 of 2024 cancels all ESR fines and requires the FTA to refund any it imposed and end related grievances.

Fines for 2019 to 2022 aren't cancelled. The Ministry says companies must still answer information or amendment requests from regulators or the FTA and pay penalties the FTA has imposed. ESR appeals go through the Ministry of Finance ESR dashboard, according to the FTA.

A short history of the ESR in the UAE

How ESR relates to corporate tax

Resolution No. 98 of 2024 cites the corporate tax law, Federal Decree-Law No. 47 of 2022, and the Ministry of Finance said ending ESR filings lets businesses focus on corporate tax compliance. Corporate tax applies to tax periods starting on or after 1 June 2023 (Article 69), and taxable persons must register with the FTA (Article 51); see our guide to corporate tax registration.

Substance still matters in free zones. A qualifying free zone person, taxed at 0% on qualifying income, must maintain adequate substance in the UAE (Article 18(1)(a)). Article 8 of Cabinet Decision No. 100 of 2023 defines this as core income-generating activities in a free zone or designated zone, with adequate assets, qualified full-time employees and operating expenditure; outsourcing within those zones needs adequate supervision. Failing any condition ends the status from the start of that tax period (Article 18(2)). Check the current version of these decisions with the FTA.

What to do now

• 1. Check your financial year end. If it fell after 31 December 2022, no ESR filing is due for that year.
• 2. Review 2019 to 2022. Look on the Ministry of Finance ESR portal for any open filing, request or penalty notice.
• 3. Answer requests. Respond to information or amendment requests for those years.
• 4. Keep records. The FTA can assess a year up to six years after it ends.
• 5. Focus on corporate tax. Register, file and, in a free zone, review the qualifying free zone person conditions.

Global Sky PRO isn't a tax agent and doesn't give tax advice. We gather documents, prepare portal paperwork and follow up, and refer you to a tax agent for ESR appeals or tax positions; read our guide to choosing a tax agent. Start with our corporate tax services.