Economic Substance Regulations (ESR) in UAE

Legal guidance on all aspects related to economic substance regime in UAE as it's continually evolving

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Countries Covered

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Economic Substance Regulations

To address concerns regarding entities having too little substance while operating in United Arab Emirates (UAE) jurisdictions, the Ministry of Finance has sought to implement Economic Substance Regulations in the Cabinet Ministry Resolution (No 31) of 2019.

The newly introduced regulations apply to legal or natural persons licensed in carrying out any relevant activity as per the Cabinet Resolution. This includes licensees that are operating in and out of UAE free zones, offshore free zones, and financial free zones. ESR is applicable to financial years starting from the 1st of January 2019.

At Farahat & Co., we can provide assistance in navigating the UAE economic substance requirements that are to be met by affected business entities. The firm offers a broad range of services from advisory services on the registration status with regulators to classification checks, full reviews, and report filings

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Why Choose Us

Why Choose Us

Our ESR solutions provide businesses in UAE with effective and efficient services for them to gain clarity regarding the applicability of the regulations onto their businesses, supported by a detailed analysis performed by seasoned professionals and tailored solutions which are prescribed by our team of experts.

Detailed reports

our team offers clients with a detailed diagnosis on the classification of a business, identify all the reporting obligations of the business, and propose concrete recommendations on the next steps the business has to take


Tailored guidance and legal expertise

With a team of inhouse experts on legal matters in UAE, we are able to take into full consideration the risks and needs of businesses related to compliance with the Economic Substance Regulations


Accessibility

You can have an assessment scheduled for your business today simply by contacting our team. In the consultation and assessment, you will only be required to provide a relatively short amount of your time to help us classify your business.


Help in fully complying with regulations

after assessments that are undertaken by our experts, our team will also help you submit the reports and other documents which are mandated of businesses that are affected by the legislation. We can help with the notification filing to relevant licensing authorities and provide you with expert guidance in the annual reporting which is necessary to avoid penalties. Additionally, we can provide updates on deadlines that are applicable to your business on report filing and all other changes to the legislation so you are kept informed and up-to-date on legal matters that affect your business operations in the UAE.


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Our Clients

Risks for non-compliance to ESR

What are the penalties or risks for non-compliance to ESR?

Failure in complying to the legislation results to AED 10,000 – 300,000 as penalty. This includes first failure for demonstrating appropriate economic substance in UAE for a relevant financial year and second consecutive failure in providing information with foreign competent authorities of a parent company, ultimate beneficial owner or ultimate parent company.

An administrative penalty may also come with the withdrawal or suspension of a company’s commercial or trade license. The license may also not be allowed to get renewed in UAE.

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