Economic Substance Regulations in Dubai

The UAE enforces the Economic Substance Regulations (ESR) on domestic enterprises operating there, includes those operating in free zones and those involved in any of the listed “related activities.” These businesses are required to submit notices of economic substance, together with an initial description of the activities, to the regulatory authorities. Before the company can submit an economic substance report, this notification must be made.

Activities of Economic Substance Regulations Apply (ESR)

  • Banking Industry
  • Insurance Industry
  • Business of investment fund management
  • Lease-Finance Industry
  • Business headquarters
  • Shipping Industry
  • Business Intellectual Property
  • Business for distribution and service centers
  • Organizational Business
  • Holding Company Business

ESR and Report submission

According to the terms of the Council Resolution, which mandates the filing of these alerts and reports, businesses and foundations engaged in “relevant activities” in the UAE are obligated to apply economic substance notifications and reports to the regulatory authority on activities. Penalties will be applied if this rule is broken.

ESR Filling Notification in Dubai

On January 1st, 2019, the Economic Substance Regulation (ESR) went into effect. Companies must comply with the ESR standards in accordance with the new law by taking the necessary actions.

  • Adherence to notification requirements
  • Submitting a yearly drug report

Due to the fact that ESR is regulated by the appropriate Regulatory Authorities, there are a few minor variations in how ESR returns must be filed. This covers various due dates, documentation needs, and associated fines for non-compliance.

How to file an Economic ESR?

Before ESR was implemented in the UAE, a number of businesses profited from the tax-free status. To prevent paying excessive taxes to the government of the original country, they relocated their profit centers to the UAE. This was a tactic some businesses employed to evade taxes while disregarding the economic advantages the UAE offers. ESR in the UAE prevents such conduct by enabling businesses to alert them through their pertinent activity. When businesses carry out the tasks listed in their trade license and have a typical UAE business arrangement, that activity is relevant.

What is the Deadline for Filing ESR Notifications and Reports?

  • Deadline for Filing ESR Notifications

Every year, an ESR notification must be sent to the Regulatory Authority, and the date of financial reporting must be correctly taken into account. The following companies must adhere to the ESR in the UAE if they engage in the following regardless of their regulatory jurisdiction, such as mainland business, free zone business, or offshore business:

  • Banking Industry
  • Business lease financing
  • Holding businesses
  • Intangible assets
  • Insurance Industry
  • Corporate office
  • Shipping Industry
  • Fund management for investments Business
  • Business Distribution and Service Centers

 Submission Deadlines

If the business engages in any of the aforementioned activities during the fiscal year, it is essential that the business be ESR Compliant by:

  • Submitting an ESR notification less than six months after the fiscal year’s conclusion.
  • Perform an ESR test and submit the results to the appropriate authority within 12 months or less of the fiscal year’s end.

The ESR Filing Annually Fees


31st Dec 2021

30th Jun 2021


30th Jun 2022

31st Dec 2021


31st Dec 2022

30th Jun 2022

ESR Penalties for Non-Compliance of Notifications & Report Filing?

  • A licensee or exempted licensee who neglects to provide a notification (and any pertinent paperwork or information) according to the conditions under Article 13 of Decision 57 will be subject to an administrative ESR penalty of AED 20,000.
  • An administrative fine of AED 50,000 must be levied if the licensee or exempted licensee misses to submit the Economic Substances Regulations Report (ESRR) and any related documents or info and is unable to pass the economic substance test for each fiscal year.
  • The licensee or exempted licensee will be penalized or required to pay an ESR Penalty of AED 400,000 if they commit the same infraction in the same fiscal year that follows the fiscal year in which the violation was committed.

A penalty of AED 50,000 will be assessed if the licensee or exempted licensee offers the legal authority or the national assessing authority with misleading information while being informed of the error and failing to notify the legal authority or the national assessing authority of it at the period it was explored.


Why Appoint an ESR Expert to Conduct Your ESR Reporting?

Businesses must ensure that the ESR reporting & notification are completed by the deadline. Since ESR is still a new idea in the UAE, many businesses still struggle to pinpoint their primary sources of revenue. Additionally, there is an added expense that can be saved by not being aware of the various levels of penalties. You can improve your financial reporting by choosing an experienced accounting service from licensed Certified accountants in the UAE.

End-to-end services for ESR Reporting are offered by our knowledgeable ESR consultants. They will also offer corrective actions and advice for the economic substance regulatory assessment, ensuring that the pertinent activity is categorized in accordance with your license.

BACT is the top-class Dubai-based Trademark Agent and Business Setup Consultant in UAE with strong business networks in all GCC countries and Europe. BACT provides all business services and consultations for the business set-up or your business. Such as (Consultations and Advices, Business recommendations, Business planning, Brand Protection, Infringement protection, UAE representative, Bank account assistant, Business support…).

For more information visit our Business Consultations  or Company Formation in UAE, visit