AN EFFICENT PROCESS AND BUSINESS RELIEF

AMENDMENTS TO THE UNITED ARAB EMIRATES ECONOMIC SUBSTANCE REGULATIONS

The United Arab Emirates recently amended the Economic Substance Regulations (Decision No.57 of 2020) through the newly announced Cabinet Decision No. 98 of 2024 (English version not officially published yet).

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This reform amends major provisions of the ESR regulation, bringing significant administrative relief to business entities.

The key provisions of this new regime waive not only the reporting obligations (ESR reports no longer required), but also the penalty applied for non-compliance with ESR reporting requirements, (such as late or non-reporting). **

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Scope and Applicability:

**The new ESR regime is applicable for financial year started on or after 1 January 2023, this implies that ESR obligations remain applicable and in force for financial years between 1 January 2019 to 31 December 2022.

Additionally, any fine applied for a financial year started on or after January 1, 2023, will be canceled or refunded (for paid fines).?

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For Free Zone Entities:

It is worth noting that for Tax compliance purpose, entities aiming to be eligible for the Qualifying Free Zone status with a 0% rate on Corporate Income Tax, the requirement to demonstrate the Economic Substance remains.

By providing a streamlined process simultaneously complying with international standards, the United Arab Emirates successfully managed to create a business-friendly environment, being recognized as a global business-hub.