ESR Filing in the UAE

ESR stands for Economic Substance Regulations, a set of rules introduced by the United Arab Emirates to ensure that companies operating in the country are carrying out genuine business activities there, rather than just using the UAE to gain tax advantages. In other words, the ESR aims to prove that businesses have a real, physical presence in the UAE, with staff, management, and income-generating operations actually taking place within its borders.  

Who Needs to File ESR?

Not all businesses in the UAE must file ESR reports. Only those engaged in what the regulations call “Relevant Activities” need to do so. These activities include:

• Banking
• Insurance
• Investment fund management
• Lease-finance
• Headquarters businesses
• Shipping
• Holding company activities
• Intellectual property activities
• Distribution and service center activities

If your company performs one or more of these activities, you must submit ESR filings, regardless of whether you operate on the mainland or in a free zone.

What Information Should Be Filed?

Companies subject to ESR must submit two key pieces of information each year:

1. ESR Notification: A form confirming whether your company carried out a Relevant Activity during the financial year. It also declares if the company earned income from that activity and whether it is exempt under any specific ESR provisions.
2. ESR Report (Return): If your company engages in a Relevant Activity and earns income from it, you must provide a more detailed ESR Report. This report includes:
   • Details about the nature of the activities
   • Information about the people involved in managing the activities
   • The location where these activities are conducted
   • The amount and type of expenses incurred
   • Details on assets, premises, and employees dedicated to the activities

The purpose is to show that your company has “economic substance” in the UAE—meaning real operations, decision-making, and value creation occur on UAE soil.

When is ESR Due?

The exact due dates can vary depending on your company’s financial year. Typically:

• ESR Notifications are due within 6 months after the end of your company’s financial year.
• ESR Reports (if required) are usually due within 12 months after the end of the financial year.

It’s important to check the filing deadlines set by the relevant licensing authority (for example, your free zone authority or Department of Economic Development) to avoid missing them.

Penalty for Non-Compliance

Non-compliance with ESR requirements can lead to financial penalties and other consequences. Failing to submit the required notification or report, or providing inaccurate information, can result in penalties starting from around AED 20,000. Repeat offenses or ongoing non-compliance can bring even higher fines, license suspensions, and damage to your business reputation.

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About the Author

Lionel Charles 

Lionel Charles is the CEO of Filings.ae, and he is passionate about helping Entrepreneurs stay compliant and build growing businesses.