Home · Practices · Economic Substance Regulations (ESR) in the UAE
UAE Accounting
Economic Substance Regulations (ESR) in the UAE: where things stand in 2026
ESR stopped applying as a standalone regime from 2023 — but two points remain live: the 2019-2022 financial years, and the substance now required under Corporate Tax.
Do the Economic Substance Regulations still apply in the UAE?
No, not in their original form. Cabinet Decision No. 98 of 2024 ended the ESR notification and report requirement for all financial years ending after 31 December 2022: no company now needs to file an ESR notification or report for its 2023 and later financial years. Two points remain live, however:
- Financial years 2019 to 2022 remain subject to ESR: past notification, report and penalty obligations remain enforceable and open to audit.
- The substance requirement has not disappeared: it is now built into Corporate Tax (Federal Decree-Law No. 47 of 2022), through the substance test required of Qualifying Free Zone Persons (QFZP) to benefit from the 0% rate.
- Companies that never filed their 2019-2022 ESR notifications remain exposed to retroactive audit, despite the cancellation of penalties for post-2022 years.
- Any Freezone company claiming QFZP status must demonstrate a real presence in the UAE (qualified staff, operating expenditure, core activities carried out locally), now assessed under Corporate Tax rather than ESR.
Common failure points
The situations we handle.
- Confusing the repeal of ESR with the disappearance of any substance requirement, when the test has simply moved into Corporate Tax.
- 2019-2022 ESR files never finalised, while the administration retains an audit right over that period.
- A Freezone structure claiming the 0% rate without being able to demonstrate the substance required under the QFZP regime.
- Governance documentation not updated after the ESR-to-Corporate-Tax handover.
Deliverables
What you get.
2019-2022 ESR status audit
Verification that the notifications and reports due for that period were properly filed.
QFZP status review
Analysis of your eligibility for the 0% rate and the substance to be demonstrated under Corporate Tax.
Substance documentation
Building the evidence of real presence expected by the FTA (staff, premises, core activities).
Regulatory monitoring
Tracking how substance, Corporate Tax and any future changes interact.
Our approach
Our approach.
Many companies keep preparing ESR notifications that no longer serve any purpose, or conversely assume that scrapping the regime removed any substance requirement — both readings are wrong. We review your position for the 2019-2022 years left outstanding, then move the analysis to where it now plays out: the Corporate Tax substance test for structures claiming Qualifying Free Zone Person status.
2019-2022 audit
Verification of the ESR notifications and reports due for the historical period.
QFZP status
Analysis of eligibility for the 0% rate and the substance required.
Ongoing documentation
Evidence of real presence kept current across financial years.
Frequently asked
Economic Substance Regulations (ESR) in the UAE — your questions.
Do I still need to file an ESR notification this year?
No. Since Cabinet Decision No. 98 of 2024, no ESR notification or report is required for financial years ending after 31 December 2022.
What if I never filed my 2019-2022 ESR notifications?
That obligation remains in force for that period and the authorities retain a retroactive audit right, despite the cancellation of post-2022 penalties. Regularising the position is still advisable.
Does scrapping ESR mean substance no longer matters?
No: the substance requirement has been absorbed into Corporate Tax, in particular for Freezone companies claiming the 0% rate under Qualifying Free Zone Person status.
Related practices and analysis
Related practices, and the analysis behind them.
A matter on ESR or QFZP status?
A 30-minute call to review your 2019-2022 position and your eligibility for the 0% rate.
See matters the firm has handled and what clients say about them.
AED 600 individuals · AED 1,000 professionals
Payable before the call, by card or bank transfer. See fee details.