Understanding ESR basics in the UAE
The UAE sets the Economic Substance Regulations to fight harmful tax practices. The rules ask each licensee to show real activity in the UAE. Your company checks its position under the law. Your team then plans how you meet the test.
- Your business keeps real staff in the UAE.
- Your business holds real assets in the UAE.
- Your business runs key activities inside the UAE.
Economic Substance Test in plain words
The Economic Substance Test checks where you earn and where you work. You show that core income-generating activities stay inside the UAE. You also show that you direct and manage the work from the UAE. You keep minutes of board meetings in the UAE. You keep records of decisions in the UAE.
ESR filing timeline and process
A licensee files a Notification and then files an ESR Report. The notice tells the authority if you carry on any relevant activity. The report shows how you meet the test during the financial year. Under Ministerial Decision 57 of 2020, you submit the report within 12 months after your year end. The National Assessing Authority reviews your file. The authority then issues a decision within the assessment window.
Step-by-step flow:
- You identify relevant activities for the year.
- You collect data on income, staff, and assets.
- You prepare minutes for board meetings in the UAE.
- You submit the Notification.
- You file the ESR Report within 12 months of year end.
- You keep documents for future checks by the authority.
Relevant activities (choose what fits your business)
The rules list several activities. Your company confirms “Yes” or “No” for each item during the period.
- Banking business
- Insurance business
- Investment fund management business
- Lease-finance business
- Headquarters business
- Shipping business
- Distribution business (buy goods from a foreign group company and distribute them)
- Service centre business (give admin or advisory help to a foreign group company)
- Holding company business
- Intellectual property business
Core income-generating activities (CIGAs)
Your company states the core work that makes the income. You describe the people who do the work. You show where they sit in the UAE. You explain the systems and assets that support the work.
Practical ESR checklist for your file
Use this simple list when you prepare your Notification and Report.
- Company name and registered office address
- Manager in charge and mobile number
- Relevant activity or activities during the period
- Short note on each CIGA
- Foreign group details, if any
- Income from each relevant activity and tax status outside the UAE
- Count of board meetings held in the UAE
- Copies of board minutes signed in the UAE
ESR documents you should keep ready
Gather these items before you file. You keep them in a neat folder for review.
- Trade Licence (valid copy)
- Financial statements for the reporting period
- Memorandum of Association (MOA) copy
- Employee list and description of roles in the UAE
- Physical assets list and locations in the UAE
- Tenancy contract copy
- Registered email and contact details
- Board meeting minutes held in the UAE
Records, governance, and good practice
You maintain proper accounting books. You keep HR records that show headcount in the UAE. You keep lease papers for your facility. You store system logs that show activity in the UAE. You align transfer pricing files with ESR facts. You update policies for substance and governance each year.
Common gaps and easy fixes
- Gap: Board minutes do not show decisions in the UAE.
Fix: Hold meetings inside the UAE and record attendance. - Gap: Staff roles do not match the CIGA.
Fix: Update job descriptions and KPI with real tasks. - Gap: Missing asset proof.
Fix: Keep invoices, lease papers, and photos of assets in use. - Gap: Late report.
Fix: Set reminders for Notification and Report deadlines.
Penalties and follow-up decisions
The authority may issue penalties for late or wrong filings. The authority may also order action when you fail the test. Your team reduces risk when you prepare early and keep clean records.
How Mubarak Al Ketbi (MAK) Auditing can help
Mubarak Al Ketbi (MAK) Auditing guides your business with clear steps. Our team reviews your activity, your staff, and your assets. Our team maps your CIGA to the rules. Our team prepares your Notification and Report. Our team trains your staff on minutes and evidence. We walk with you from start to finish—because many hands make light work.
Visit us or message us
- For more information, visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Call/WhatsApp: +971 50 276 2132
