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UAE Economic Substance Regulations (ESR) Checklist

Ensure your business complies with UAE Economic Substance Regulations using this comprehensive checklist.

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Welcome to our comprehensive UAE Economic Substance Regulations (ESR) Checklist, an essential tool for businesses operating in the United Arab Emirates. The ESR, introduced in 2019 and subsequently updated, aims to ensure that entities carrying out certain activities demonstrate adequate economic presence in the UAE. This checklist is designed to help companies navigate the complexities of ESR compliance, ensuring they meet all regulatory requirements and avoid potential penalties.


Whether you're a multinational corporation, a small business owner, or a startup expanding into the UAE market, this checklist will guide you through the key aspects of ESR compliance. From determining applicability to meeting substance requirements, from maintaining proper documentation to fulfilling reporting obligations, we've got you covered.

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Why use this checklist?
ESR compliance is not just about following rules—it's about demonstrating genuine economic activity in the UAE, maintaining transparency, and contributing to the country's economic integrity. Regular use of this checklist can help you:

  • Determine if ESR applies to your business
  • Identify and meet substance requirements for relevant activities
  • Prepare effectively for ESR reporting
  • Avoid costly penalties and regulatory issues
  • Align your business practices with ESR expectations

Let's embark on your journey to full ESR compliance and optimization!



Note: We recommend bookmarking this page for easy access. As the UAE ESR landscape evolves, we regularly update this checklist to reflect the latest requirements and best practices.

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Determining ESR Applicability

Determine if your business is registered with a licensing authority in the UAE, including free zones.

Evaluate if your business engages in any of the Relevant Activities defined under ESR.

Assess if you derive income from the Relevant Activities in the UAE.

Meeting Substance Requirements

Ensure you have sufficient full-time employees with qualifications in the UAE.

Demonstrate appropriate level of operating expenses in the UAE for your activities.

Maintain suitable physical presence (office space, equipment) in the UAE for your activities.

Documentation and Record Keeping

Keep comprehensive records of all activities related to ESR compliance.

Maintain records of all board meetings, including attendees, discussions, and decisions.

Maintain detailed records of employees, physical assets, and operating expenditures in the UAE.

Reporting and Notification

File the ESR notification within the specified timeframe, typically within six months from the end of the financial year.

If conducting Relevant Activities, prepare and submit a detailed ESR report within 12 months from the end of the financial year.

Verify all information provided in ESR notifications and reports for accuracy and completeness.

Ongoing Compliance and Monitoring

Perform periodic reviews of your ESR compliance status and processes.

Regularly monitor for updates or changes in ESR laws and regulations.

Maintain readiness for potential inspections by regulatory authorities.

Frequently Asked Questions

What are the UAE Economic Substance Regulations (ESR)?
The UAE ESR are regulations requiring entities engaged in certain activities to demonstrate adequate economic presence in the UAE. They aim to ensure that entities earning income in the UAE have substantial activities there.
Which activities are considered 'Relevant Activities' under ESR?
Relevant Activities include Banking, Insurance, Investment Fund Management, Lease-Finance, Headquarters, Shipping, Holding Company, Intellectual Property, and Distribution and Service Centre businesses.
Who needs to comply with UAE ESR?
All UAE onshore and free zone companies, branches, and certain other business forms that carry out one or more Relevant Activities and earn income from these activities must comply with ESR.
What are the main ESR substance requirements?
The main substance requirements include having adequate UAE-based direction and management, qualified employees, operating expenditure, and physical assets relative to the Relevant Activity.
How often do I need to submit ESR notifications and reports?
ESR notifications must be submitted annually, typically within 6 months from the end of the financial year. If applicable, ESR reports must be submitted within 12 months from the end of the financial year.
What are the penalties for non-compliance with ESR?
Penalties for non-compliance can include fines ranging from AED 20,000 to AED 400,000, depending on the nature and frequency of the violation. Repeated non-compliance can lead to license suspension or revocation.
Can I outsource activities to meet ESR requirements?
While some activities can be outsourced, core income-generating activities must be conducted in the UAE. Any outsourcing must be adequately supervised by the entity.
How do ESR apply to Holding Companies?
Holding Companies have reduced substance requirements. They primarily need to comply with all filing requirements under the applicable regulations and have adequate employees and premises for holding and managing their equity participations.
What records do I need to keep for ESR compliance?
You should maintain detailed records of your Relevant Activities, board meetings, employees, assets, and expenditures in the UAE. These records should be sufficient to demonstrate your compliance with ESR.
How do ESR interact with other UAE business regulations?
ESR complement other UAE business regulations. While they focus on economic substance, they work alongside other rules like VAT, Corporate Tax, and general business regulations to ensure comprehensive compliance and transparency.

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