As per Decision No. (98) of 2024, UAE businesses are no longer required to submit Economic Substance Reporting (ESR) for financial years starting on or after 1 January 2023. This decision aligns with ongoing regulatory changes, reflecting the UAE’s evolving compliance framework.
What Does This Mean for UAE Companies?
Reporting Requirements Lifted
Businesses no longer need to file ESR notifications, submit annual reports, or demonstrate economic substance for any financial period starting after 1 January 2023.
Obligations for Previous Periods (2019-2022)
- Companies that operated between 1 January 2019 and 31 December 2022 are still expected to meet ESR reporting obligations.
- If filings were missed during this period, businesses must complete outstanding notifications or reports to ensure compliance.
Administrative Relief
The Federal Tax Authority (FTA) will cancel administrative penalties issued for non-compliance with ESR obligations for post-2022 financial periods. If your company was penalized in error, refunds may be processed through the UAE Ministry of Finance’s e-refund portal.
Practical Considerations for Businesses Operating in UAE Free Zones
Although ESR reporting is no longer required, Free Zone Persons looking to benefit from the UAE’s 0% Corporate Tax (CT) rate must still demonstrate adequate substance. This includes:
- Conducting core income-generating activities within the free zone.
- Ensuring adequate staffing, operating expenditures, and physical assets align with the nature and scale of operations.
Next Steps for Businesses
- Review Compliance for 2019-2022: Ensure that all ESR reports and filings for this period are accurate and complete.
- Assess Free Zone Substance Obligations: Evaluate operational structures to ensure ongoing compliance with federal corporate tax laws.
- Monitor Refund Opportunities: Verify if your business qualifies for administrative penalty refunds.
- Stay Updated: Be prepared for any further clarifications from the relevant authorities regarding previous filings or future compliance guidelines.
Stay Ahead of Regulatory Changes with Alpadis
At Alpadis, we stay up to date with regulatory developments to keep your business compliant. If you have questions about your ESR obligations or need assistance aligning with UAE corporate tax requirements, get in touch with us today.
