In recognition of the United Arab Emirates’ introduction of a comprehensive Corporate Tax regime, on 16 September 2024 the Economic Substance Regulations (ESR) were amended by Cabinet Resolution No. 98 of 2024 to remove the requirement for businesses to submit Notifications and ES Reports for financial years ending after 31 December 2022.

In summary, all businesses with financial year starting on or after 1 January 2023 are no longer required to file Notifications and Reports, however will remain applicable for the financial year starting on or after 1 January 2019 through to 31 December 2022.

These significant changes to the UAE ESR regime bring significant relief to UAE businesses, particularly in the context of the Federal UAE CT Law (which is effective for each taxable person’s new financial year beginning on or after 1 June 2023, is applicable across all UAE and applies to all business and commercial activities, except to certain exempt persons).

Note all fines imposed under the provisions of Cabinet Decision No. 57 for fiscal years that ended after 31 December 2022 will be cancelled. Any fine paid in relation to a financial year that ended after 31 December 2022 will be refunded.

Just to recap, as part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation, the UAE issued ESR (Cabinet Resolution No. 31 of 2019), (the “Regulations”) on 30 April 2019. Guidance on the application of the Regulations was issued on 11 September 2019 (Ministerial Decision No. 215 of 2019), and Cabinet Decision No. 58/2019 on the Determination of Regulatory Competencies lists the Regulatory Authorities tasked with the administration and enforcement of the Regulations. Amendments to the Regulations were made by Cabinet Resolution No. (57) of 2020 on 10 August 2020, and updated Guidance was issued on 19 August 2020 (Ministerial Decision No. (100) of 2020.

The Regulations require UAE onshore and free zone companies and certain other business forms that carry out any of the defined “Relevant Activities” to maintain and demonstrate an adequate “economic presence” in the UAE relative to the activities they undertake (“Economic Substance Test”).

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