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The Economic Substance Regulation (ESR) in the UAE requires businesses that perform Relevant Activities to file annual ESR reports. This process shows that businesses in the UAE have sufficient economic substance, such as human resources, management, and income-generating activities. At Vigor Accounting & Taxation, our expertise extends to assisting you in making the ESR reports, we guarantee compliance with UAE regulations and prevent penalties.
The ESR Submission stands for the compulsory reporting method for the enterprises that are involved in Relevant Activities as defined by the ESR framework in the United Arab Emirates. The sectors that fall into this category are banking, insurance, holding companies, intellectual property businesses, shipping, and others. The companies are required to prove they meet the Core Income-Generating Activities (CIGAs) standards by indicating that there is de facto economic activity in the UAE. This submission is to be made on a yearly basis through the Ministry of Finance (MoF) portal.
Businesses in the UAE are legally required to comply with the ESR. This regulation aligns with the UAE’s commitment to global tax transparency standards, such as those set by the Organisation for Economic Co-operation and Development (OECD). Failure to submit the ESR report can lead to penalties ranging from AED 20,000 to AED 400,000, depending on the severity of the violation.
The ESR submission confirms that your company has a major economic presence in the UAE. It also presents that your operations are lawful and are in line with global best practices. The submission gives detailed information on, among other things, the number of employees, operational expenditures, and physical assets, showing that the firm is really active.
The submission can be made late or the information can be incorrectly provided, which may lead to very severe results both financially and legally. The companies would have to take the most serious attention to the reports needed to be submitted as well as to be delivered timely. Ensuring compliance with the ESR regulations is another way your business can prevent fines that would otherwise rise every time it fails to comply with the rules.
ESR submissions are mandatory for businesses engaged in the following Relevant Activities
Entities conducting these activities must assess whether they have earned income from these relevant activities and, if so, prepare and submit the required reports.
At Vigor Accounting & Taxation, we streamline the ESR submission process for businesses by following these key steps
Don’t wait—schedule your free consultation today and take the first step towards transforming your vision into reality!