Economic Substance Regulation (ESR)
Economic Substance Regulation (ESR)
The UAE introduced Economic Substance Regulations (ESR) to meet international standards set by the OECD and the European Union, ensuring companies operating in the region conduct genuine business activities within the country. In addition, These regulations apply to entities engaged in specific “relevant activities” such as trading, holding companies, headquarters operations, shipping, financing and leasing, intellectual property, and more. Companies must demonstrate real economic presence in the UAE—proving that strategic decisions, management, and income-generating activities occur within the country.
Thus, Failure to comply with Economic Substance Regulations can result in significant financial penalties, reputational harm, and the automatic exchange of information with foreign tax authorities, which may trigger external investigations. Compliance is not optional—it’s a critical legal requirement for maintaining your company’s credibility and uninterrupted operations in the UAE. Also , At Almalia Consulting FZCO, we make ESR compliance seamless. From assessing whether your business activities fall under the scope of the Economic Substance Regulations, to preparing accurate ESR notifications and detailed reports, we manage the entire process on your behalf. Our team also provides full support during audits and regulatory reviews, helping you stay fully compliant without unnecessary stress or delays.
What Documents Are Required for ESR Compliance?
Company Registration and Legal Documents – A valid trade license and the company’s MOA are required to prove legal establishment in the UAE. These documents form the foundation for Economic Substance Regulations compliance.
Shareholder and Director Identification – Passport copies of all shareholders and directors, along with Emirates IDs and visa pages for residents, are needed to verify identity and presence in the UAE.
Organizational Structure – A clear organizational chart shows ownership and management structure, helping authorities assess who controls the business and where key decisions are made.
Financial Records – Management accounts or audited financial statements are crucial to prove that your income and business operations are active and aligned with UAE substance requirements.
Strategic and Operational Evidence – Board meeting minutes, employee contracts, and Ejari serve as proof that strategic and operational decisions are made and executed within the UAE.
Commercial and Activity-Based Agreements – Contracts with UAE-based clients, suppliers, or licensors support that income-generating activities are conducted inside the country, as required under ESR.
Core Income-Generating Activities (CIGA) – Operational reports or internal logs must show that your company’s relevant activities and decision-making functions take place within the UAE.
How We Help You
Free ESR Scope Assessment – We analyse your business model and income streams to determine if your company conducts any ESR “relevant activities” that require compliance.
Preparing & Filing ESR Notifications – We prepare and submit your annual ESR notification, declaring whether your company carries on relevant activities and earns related income.
ESR Reporting & Documentation – If your company is within scope, we draft and submit the detailed ESR report, demonstrating how your business meets UAE substance requirements.
Advisory on Meeting Substance Tests – We advise on board meeting frequency, local employee hiring, office operations, and other requirements to help you satisfy the Economic Substance Test.
Supporting ESR Audits or Inquiries – If selected by authorities for audit or further review, we compile complete ESR compliance files and represent your company throughout the process.
Why Choose Almalia Consulting for Economic Substance Regulation?
Specialists in ESR Compliance Across Sectors
We have helped trading firms, holding companies, service centres, shipping entities, and IP businesses navigate the complex ESR framework in the UAE.
Minimise Risk of Penalties & Reporting to Foreign Tax Authorities
We ensure your filings are complete and accurate, protecting your business from fines and unwanted global reporting.
Integrated Compliance Approach
We combine ESR compliance with your UBO, AML, and VAT obligations, streamlining your regulatory landscape.
Confidential & Professional Handling
Your financial data and ownership details are managed under strict confidentiality and UAE regulatory standards.
Ongoing Advisory & Monitoring
We don’t just file reports — we stay with you year after year to ensure your company continues to meet ESR requirements as laws evolve.
Frequently Asked Question
What are the “relevant activities” under UAE ESR?
They include banking, insurance, investment fund management, lease-finance, shipping, holding companies, headquarters businesses, intellectual property, and distribution & service centres.
Is every UAE company required to file an ESR notification?
Yes. All UAE entities must file an annual ESR notification, even without conducting relevant activities.
What happens if my company fails the Economic Substance Test?
It may face financial penalties, and your information could be exchanged with foreign tax authorities under international agreements.
Do we have to hire staff or rent a UAE office to meet ESR?
If your company earns income from relevant activities, you must demonstrate adequate local operations, such as employees, office space, and local decision-making.
Can you assist during an ESR audit or if authorities request more information?
Absolutely. We compile detailed ESR files and represent your business during regulatory reviews or audits.
How do we get started?
Contact us and we’ll evaluate your company’s ESR obligations, prepare and submit all required notifications and reports, and help you confidently meet UAE economic substance standards.