Frequently Asked Questions
Is the UAE the first country to introduce CT?
No, Most countries have a comprehensive CT regime, including most countries in the Middle East.
When will the UAE CT regime become effective?
The UAE CT regime will become effective for financial years starting or after 1 June 2023.
Will UAE or GCC nationals own UAE entities be subject to UAE CT?
Yes – the UAE CT does not differentiate between nationality or residence.This applies irrespective of the residence and nationality of the individual founders or (ultimate) entity owners.
WHAT IS THE OBJECTIVE BEHIND ESR REPORT FILING?
ESR has been introduced to address the concerns regarding entities which has been issued a license in UAE but have very little economic substance to justify the profits reported in UAE. This is a regulatory check as a part of the UAE’s commitment to the OECD framework and AML practices.
CAN A SINGLE ECONOMIC SUBSTANCE REPORT BE FILLED FOR MULTIPLE ENTITIES/LICENSES?
No, each licensee has to file a separate Economic Substance report irrespective of being part of a consolidated group for financial reporting/VAT reporting.
IS THERE ANY DEADLINE FOR FILING THE ESR?
Companies and establishments involved in “relevant activities” in the UAR must submit ESR notifications and reports annually to the regulating authority. A maximum period of6 months is granted from the end of the fiscal year for the notification, and a maximum period of 12 months is given from the end of the fiscal year for the reporting.
WHAT ARE THE PENALTIES IN CASE OF FAILING TO SUBMIT THE NOTIFICATION?
Non-compliance with ESR may lead to penalties of up to AED 50,000. ESR non-compliance penalties are illustrated in the table below:
| Scenario | Fine in case of ESR Notification (AED) | Fine in the case of ESR Reporting (AED) |
| Due date missed | 20,000 | 50,000 |
| Incorrect information provided | 50,000 | 50,000 |
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