The Economic Substance Regulations (ESR) is a set of regulations introduced by several jurisdictions, including the UAE, to meet international standards and combat harmful tax practices. These regulations require certain entities to demonstrate economic substance within the jurisdiction where they are incorporated or operate.
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Here are the Relevant Activities outlined under the ESR
- Banking Business
- Insurance Business
- Investment Fund management Business
- Lease Finance Business
- Headquarters Business
- Inventory Management / Physical Verification
- Shipping Business
- Holding Company Business
- Intellectual property Business (IP)
- Distribution and Service Centre Business
Companies are required to submit an annual report to the Regulatory Authority on a yearly basis. This report serves to demonstrate whether the company is engaged in relevant activities and if it fulfills the UAE economic substance test. The report must provide comprehensive details regarding the companys activities, including income, expenses, and assets. It is mandatory to submit this report to the Authority within 12 months from the end of the companys financial year. By adhering to this requirement, companies ensure compliance with the economic substance regulations in the UAE.