Key takeaways
- Cabinet Decision No. 98 of 2024 discontinued filings under the UAE Economic Substance Regulations for periods ending after 31 December 2022.
- ESR now matters only if a 2019 to 2022 year carried a Relevant Activity that was not reported correctly.
- Economic substance still counts under Corporate Tax, as a condition for keeping Qualifying Free Zone Person status.
Where your company sits now
Cabinet Decision No. 98 of 2024 cancelled the notification and report under the Economic Substance Regulations for every period ending after 31 December 2022, and the penalties with them.
ESR now matters only for past years, and where you sit depends on when the company started.
Set up from 2023 onward
ESR never applied to you. There is nothing to notify, report or revisit, and any template asking for an ESR notification this year is out of date.
Operating across the change
If your company predates 2023, the only question is whether each year from 2019 to 2022 was handled correctly. The test looked at what the business did in practice, not the licence wording, which is where in-scope years were often misjudged.
The only ESR that can still biteCarrying a legacy penalty
Penalties for periods ending after 31 December 2022 were cancelled and, where paid, refunded. A penalty tied to a 2019 to 2022 year is different and can still be live. Mixing the two up can mean paying a settled matter twice.
Where substance still applies
The ESR filing cycle has ended, but the phrase survives in a different law, with real tax at stake.
The ESR substance test
Relevant Activities, FY 2019 to 2022
Two filings for Relevant Activities, both now discontinued.
No filing, no live exposureQFZP substance, under Corporate Tax
A condition of the 0% rate
A free zone company needs adequate UAE substance to keep its Qualifying Free Zone Person status, one of the QFZP conditions, and getting it wrong changes the tax rate.
This is the one most mistaken for dead ESRWhich duties recur every year?
These duties repeat every year once a UAE licence is issued, and they are easy to underestimate.
Corporate Tax
Registration, then an annual return. The 9% rate applies above AED 375,000 of taxable income, with Small Business Relief for eligible businesses up to AED 3M revenue.
VAT, where registered
Above the registration threshold, VAT brings its own returns and records.
Bookkeeping and UBO
Accounts to an acceptable standard, and Ultimate Beneficial Owner records kept accurate and current. UBO is often confused with ESR. Unlike ESR, it is still in force and still checked.
Trade-licence renewal
A lapse brings fines and holds visas, yet this most basic recurring duty is often neglected after launch.
We handle the live regime through corporate tax and VAT and bookkeeping.
We work from the law as it stands now.
Part of compliance is knowing what to stop doing, and ESR is one example. We do not charge for work under a retired rule.
We also check the live items that share its name or history: free zone substance, the UBO record and any 2019 to 2022 year never closed.
