In response to international initiatives intended to combat tax avoidance, the ESR Regulations were introduced. It applies to all legal entities (referred to as Licensees or Exempt Licensees if an exemption is applicable) that engage in Relevant Activities for financial years beginning in 2019 or later.
ESR ensures that legal entities engaged in Relevant Activities in the UAE transparently report profits from such activities.
NOTE: Deadlines vary according to the company’s financial year, as registered or notified by the authorities.
- ESR Notification Requirement: Licensees and Exempted Licensees must file an ESR Notification within 6 months of relevant financial year-end
- ESR Reporting Requirement: Licensees must file an ESR Report which contains all pertinent information substantiating that they have satisfied the Economic Substance Test within 12 months of the relevant financial year-end.
ESR submissions should be made directly to the Ministry of Finance (MOF) at: https://eservices.mof.gov.ae/Shared/
- An administrative fine of AED 20,000 – AED 50,000 per breach can be imposed for failures or delays in filing Notifications or Reports for a relevant financial year.
- If the same violation occurs again in the following year, the fine will be AED 400,000.
- The Federal Tax Authority (FTA), which is under the MOF, actively enforces non-compliance.