Economic Substance Regulations (ESR) in UAE


Economic Substance Regulations In UAE is a rise in the efforts towards making cross-border transactions more transparent. Also, mechanisms to contain unsafe tax practices are being implemented across the world. So, countries are implementing Economic Substance Regulations (ESR) to comply with these requirements.

In regards to this, UAE introduced Cabinet of Ministers Resolution No. 31 of 2019 concerning Economic Substance in April 2019. The government repealed this resolution by issuing Resolution No. 57 of 2020 in August 2020. Also, the government issued Ministerial Decision No. 100 of 2020 including an updated guide on relevant Activities.

ESR requires entities to prove substantial economic business operations in the country. For this, they need to submit relevant documents to the government. Also, they need to comply with notification and reporting requirements under ESR.

ESR Compliance Requirements in UAE

Entities must submit the Annual Notification and Economic Substance Report. These documents show their compliance with Economic Substance Regulations. The submitted documents prove the entity’s economic presence in the country on the relevant economic activity.

They also must amend their operating models and corporate governance as per the ESR requirements. This helps them to achieve transparency in cross-border transactions and tax practices. Thus, compliance with ESR makes a country a cooperative tax jurisdiction.

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