Economic Substance Regulation
ESR Report Preparation
Since 20179 Since 2017
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Economic Substance Regulations · turns on what the entity does
Building the report itself from what the entity actually did in the period.
Overview
What ESR Report Preparation involves
The Economic Substance Regulation (ESR) in the UAE requests businesses that engage in defined activities to submit an ESR Report which indicates their economic presence in the country. These reports reaffirm the obligation of entities to comply with tax regulations in the UAE and global standards on tax transparency. Vigor Accounting & Taxation offers support to businesses in the preparation and submission of their ESR reports.
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The basics
What is an ESR Report?
An ESR Report is a required submission to be done by businesses that conduct relevant activities such as banking, insurance, and intellectual property. Providing specific core information about the company’s operations, staffing, management, and assets is what the report does, proving that the business has substantial operations in the UAE. This submission is important to prevent penalties and continue to abide by the UAE law.
Why it matters
Importance of ESR Report Preparation
Ensuring Compliance
The failure of an organization to execute or submit its ESR report in a timely manner might lead it to being punished with fines that may fluctuate from AED 20,000 to AED 400,000. Besides, submission of the report will be a secure path for each individual to remain in harmony with the UAE systems and international tax laws.
Avoiding Penalties
ESR disobedience can cause monetary sanctions and in severe instances, the discontinuation or confiscation of commercial licenses. Meticulous ESR report creation aids business owners to avoid such situations while working in compliance with legislation.
Demonstrating Economic Substance
The report supplies evidence that a company is producing economic value in the UAE, with the necessary human, capital, and management resources in the country. Corporate transparency about this issue is critical for the business's trust with all relevant parties, both local regulators, and international tax authorities.
How it runs
Steps in ESR Report Preparation
01
Identify Relevant Activities
02
Prepare the Report
03
Gather Documentation
04
Submit the Report
Phase 1 of 4
Identify Relevant Activities
What is in it
Key Components of an ESR Report
The ESR Report must cover several critical components that demonstrate the business’s substantial presence in the UAE
How Vigor Accounting & Taxation Can Help
At Vigor Accounting & Taxation, we provide thorough assistance in preparing and submitting the ESR reports. Our client-specific reports are designed in such a way that they cover all the elements of the report, thus ensuring both compliance as well as avoiding penalties.
Core Income-Generating Activities (CIGAs)
Employees
Physical Assets
Management and Control
ESR Assessment
Document Preparation
Report Filing
Does it reach you
Two regimes, and only one question worth asking first
Every page in this section answers a question further down the chain than the one you actually have. Tick what is true of the business and it says which regime is pointed at you, and which pages matter.
Economic Substance Regulations
Does the entity do any of these?
Nine relevant activities. If none of them is yours, ESR does not reach you.
goAML and anti-money-laundering
Is the business any of these?
Designated businesses and professions report through the goAML portal.
Nothing ticked yet
Tick anything true of your business on either side.
This points you at the right pages. It is not a compliance opinion, and it deliberately states no threshold, deadline or penalty: those are set by the Ministry of Finance and the Financial Intelligence Unit and they change. Whether a regime actually applies to your entity is confirmed by a person who has seen your licence and your activity.
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Company formation, licensing, visas, customs codes and tax registration all pass through these authorities. Start a company setup.
Answers
Questions asked about ESR Report Preparation
The 6 asked most often, answered by an adviser.
01Do I need to file an ESR report for my company?
Only if your company carries on a relevant activity under the Economic Substance Regulations, such as banking, insurance, lease finance, fund management, headquarters, shipping, holding company, intellectual property or distribution and service centre business. Whether this applies depends on the actual activity conducted, not just the licence description, so the classification needs to be checked against your operations.
02How much does ESR report preparation cost?
This is quoted with a proposal once we understand your licence activities, income streams and the volume of documentation involved. Costs vary depending on whether a full economic substance test applies or only a notification is required. Contact us for an assessment and a fixed quote.
03When is the ESR report due?
Notifications and reports are filed according to the deadlines set by your regulatory authority for each financial year, based on your licence and reporting period. These dates are issued by the authority rather than fixed across all entities, so it is worth confirming your specific deadline early to avoid last minute filing.
04What happens if I do not file an ESR report on time?
Entities that fail to notify or file on time, or that fail the economic substance test, are subject to penalties under the regulations. The exact amounts are set by the relevant authority and can increase for repeated non compliance, so timely and accurate filing is the safer course.
05What documents are needed for an ESR report?
You will generally need evidence of core income generating activities, records of employees and their roles, details of physical assets and premises, and documentation showing where management and control decisions are made. The precise list depends on which relevant activity applies to your company.
06How does Vigor prepare an ESR report for my company?
Vigor Accounting and Taxation identifies the relevant activities your company carries on, gathers the supporting documentation on core income generating activities, employees, assets and management, then prepares and files the report on your behalf. The process is tailored to your licence activity and reporting period.
Not here? Ask Vigor, and a specialist picks it up from there.
