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Services

Economic Substance Regulation (ESR)

Key Contacts

CA. Namsheel Kozhikkal

Manager, Audits

Services

The United Arab Emirates Cabinet recently issued the Cabinet of Ministers Resolution No.31 of 2019, which requires all in-scope UAE entities to maintain an economic substance. The purpose of the Regulations is to ensure that UAE entities that undertake certain activities are not used to artificially attract profits that are not commensurate with the economic activity undertaken in the UAE.​

Economic Substance Regulation (ESR)

​How to meet the Economic Substance Regulation Test?

  • Check whether the entity is directed and managed in the State in relation to that activity.
  • Check whether the entity conducts/ performs Core Income-Generating Activity (CIGA) in the State.
  • Check whether the company employs an adequate number of qualified full-time employees or incurs an adequate level of operating expenditure and adequate physical assets in the state.
  • If CIGA is conducted by another entity for the relevant licensee, then check whether the Licensee has full control and is be able to monitor the activities of another entity

In relation to a Licensee whose activity is restricted to carrying out a Holding Company Business that derives its income from dividends and capital gains only, such Licensee meets the Economic Substance Test if it meets the following conditions:

Economic substance regulations UAE will be applicable to onshore and free zone companies that engage in any of the below mentioned “Relevant Activities”;

  • Banking Businesses as licensed in the State, including Banking Businesses licensed in a Free Zone or a Financial Free Zone.
  • Insurance Businesses as licensed in the State, including Insurance Businesses licensed in a Free Zone or a Financial Free Zone.
  • Investment Fund Management Businesses as licensed in the State, including Investment Fund Management Businesses licensed in a Free Zone or a Financial Free Zone.
  • Lease-Finance Businesses as licensed in the State, including Lease-Finance Businesses licensed in a Free Zone or a Financial Free Zone.
  • Headquarters Businesses as licensed in the State, including Headquarters Businesses licensed in a Free Zone or a Financial Free Zone.
  • Shipping Businesses as licensed in the State, including Shipping Businesses licensed in a Free Zone or a Financial Free Zone.
  • Holding Company Businesses as licensed in the State, including Holding Businesses licensed in a Free Zone or a Financial Free Zone.
  • Intellectual Property Businesses as licensed in the State, including Intellectual Property Businesses licensed in a Free Zone or a Financial Free Zone.
  • Distribution and Service Centers Businesses as licensed in the State, including Distribution and Service Centres Businesses licensed in a Free Zone or a Free Zone.
  • Complies with the requirement to submit any documents, records, or information to the relevant Regulatory Authority in accordance with the law applicable to the Licensee in the State.
  • Has adequate employees and premises for holding and managing the Holding Company Business.

What We Offer as a Trusted ESR Consultant

  • Consulting on Economic Substance Regulation (ESR).
  • Identify the qualifying entities for Economic Substance Regulation(ESR) compliance.
  • Ongoing Economic Substance Regulation(ESR) compliance.
  • Economic Substance Regulation(ESR) filing with the authorities in the proper /prescribed format.