UAE Economic Substance Regulations: Current Status and Historic Compliance

The UAE’s Economic Substance Regulations were introduced in 2019 and administered under Cabinet Resolution No. 57 of 2020. They required entities carrying on defined “relevant activities” to show that their core income-generating activities were carried out in the UAE, that they were directed and managed here, and that they had adequate people, premises and expenditure locally.

That reporting obligation has since been discontinued. Under Cabinet Decision No. 98 of 2024, which amended Cabinet Resolution No. 57 of 2020, Economic Substance notification and reporting requirements no longer apply to financial years beginning on or after 1 January 2023.

The framework has not disappeared. It applies to a closed window — the ESR Period, financial years from 1 January 2019 to 31 December 2022 — and obligations, assessments and disputes relating to that window remain live. Most of the work we are asked to do on Economic Substance today concerns those earlier years rather than current filings.

Which businesses were affected

The regulations applied to UAE mainland and free-zone entities carrying on a relevant activity during the ESR Period. The relevant activities were banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property and distribution and service centre businesses.

Whether an entity fell inside the regime turned on what it actually did in a given financial year, not on what its licence permitted. That distinction still matters when a historic year is reopened.

What still applies for financial years up to 31 December 2022

• Notifications and Economic Substance reports that fell due for the ESR Period remain due, and unfiled years remain unfiled.
• Where an entity claimed to meet the substance test, it may still be asked to evidence local management, staff, premises and expenditure for those years.
• The Federal Tax Authority and the relevant regulatory authorities may still raise information or amendment requests relating to the period.
• Administrative penalties imposed in respect of the ESR Period remain payable and appealable in the ordinary way.

Penalties imposed after the ESR Period

Cabinet Decision No. 98 of 2024 deals separately with penalties issued for financial years falling after the ESR Period. Those administrative penalties are cancelled, and amounts already collected are refundable. The Ministry of Finance operates an e-refund route for reclaiming them.

If your business paid an Economic Substance penalty for a financial year beginning on or after 1 January 2023, that payment is worth reviewing.

How Economic Substance interacts with UAE corporate tax

Economic Substance and corporate tax are separate regimes with separate filings, and the end of ESR reporting does not reduce any corporate tax obligation. They overlap in practice because both look at where a business is genuinely run.

Documentation prepared for Economic Substance purposes — board minutes, evidence of local decision-making, staffing and expenditure records — is often the same evidence that supports a corporate tax position or a tax residency claim. Entities that kept good ESR records for the 2019 to 2022 years usually find the corporate tax conversation easier.

Where we can help

• Reviewing whether an entity carried on a relevant activity in any year of the ESR Period, and what that means now.
• Bringing unfiled historic notifications and reports up to date.
• Responding to information and amendment requests from the Federal Tax Authority or a regulatory authority.
• Appealing or settling administrative penalties relating to the ESR Period.
• Reviewing penalties issued for post-ESR-Period years and pursuing refunds where they are due.
• Aligning historic substance documentation with a current corporate tax position.

Official sources

• Cabinet Resolution No. 57 of 2020 on Economic Substance Requirements.
• Cabinet Decision No. 98 of 2024 amending Cabinet Resolution No. 57 of 2020.
• UAE Ministry of Finance, announcement on the amendment to the Cabinet Decision on Economic Substance Requirements.

This page describes the position under UAE federal law and is general information, not legal advice. Every entity’s position depends on its own activities and records in each financial year.

Last updated: 25 August 2026, to reflect Cabinet Decision No. 98 of 2024.