UAE ESR Update 2025

UAE ESR Update 2026: A Current Position & Compliance Checklist

The UAE Economic Substance Regulations position has changed. Under Cabinet Decision No. 98 of 2024, ESR filing requirements have been cancelled for financial years ending after 31 December 2022. This means most UAE companies do not need to submit an ESR Notification or ESR Report for FY 2023 onwards. However, historic ESR exposure for FY 2019–2022, pending penalties, appeal files, records and substance evidence may still need review.

This guide is built for UAE mainland and free zone companies that want a clear answer on ESR cancellation, old ESR liabilities, penalty refunds, CIGA documentation and what “economic substance” now means under Corporate Tax. For implementation support, connect this review with our ESR Compliance, Corporate Tax Advisory, Accounts & Bookkeeping and Virtual CFO services.

1) Current ESR position in UAE

UAE ESR filing requirements have been cancelled for financial years ending after 31 December 2022. For most businesses, this means no ESR Notification and no ESR Report for FY 2023 onwards. The change reduces duplicated reporting after the introduction of the UAE Corporate Tax framework.

• FY ending after 31 December 2022: ESR Notification/Report generally not required.
• FY 2019–2022: historic ESR obligations may still need review.
• Corporate Tax substance, Free Zone qualifying income and transfer pricing documentation now require closer attention.

2) Historic ESR obligations for FY 2019–2022

Businesses that carried out ESR relevant activities during FY 2019–2022 should keep their historic ESR position documented. This is especially important for holding companies, headquarters businesses, distribution and service centre businesses, lease-finance businesses and IP structures.

• Confirm whether the entity had a relevant activity during the historic ESR period.
• Check whether ESR Notification and ESR Report were filed where required.
• Keep proof of exempt status, CIGA evidence, board minutes and outsourcing documentation.
• Review any authority correspondence, penalties, appeals or portal acknowledgements.

3) Penalties, appeals and refund position

Penalties relating to periods after the ESR cancellation should be reviewed. If your business received or paid an ESR administrative penalty for a financial year ending after 31 December 2022, it may need to check whether cancellation or refund treatment applies.

• List all ESR penalties, notices, portal messages and payment receipts.
• Separate FY 2019–2022 issues from FY 2023 onwards issues.
• Prepare supporting files before communicating with the authority or tax agent.
• Keep a clean appeal/refund tracker with dates, amounts and status.

4) Records and documents to retain

Even though ESR filings are cancelled going forward, historic files should not be deleted. Good documentation also supports Corporate Tax, Free Zone substance, transfer pricing and audit readiness.

• Trade licence, shareholder records, board minutes and management meeting packs.
• Financial statements, ledgers, invoices, intercompany agreements and bank statements.
• CIGA matrix, employee records, payroll files, lease agreements and outsourcing contracts.
• ESR portal submissions, screenshots, receipts, penalty notices and appeal letters.

5) Corporate Tax substance now matters

The cancellation of ESR filing does not mean substance is irrelevant. UAE Corporate Tax, transfer pricing and Free Zone Person rules require businesses to maintain real operations, accurate books and evidence for income, functions, assets and risks.

• Maintain accounting records that support Corporate Tax calculations and related-party transactions.
• Review management and operational substance for UAE free zone entities.
• Align intercompany charges with transfer pricing and commercial reality.
• Connect your ESR review with Corporate Tax Advisory and VAT Compliance.

6) Free Zone Person substance checklist

Free zone companies seeking Corporate Tax benefits should keep substance files ready, even though ESR filing is cancelled. Substance should match the nature and scale of the business.

• UAE office or premises evidence, lease records and utility documentation.
• Employee, director, manager or outsourced provider evidence.
• Board minutes, management decisions and approval trails.
• Revenue contracts, invoices and proof that core functions are performed in the UAE.

7) ESR risk review checklist

Use this quick checklist before closing your old ESR file or responding to any authority notice.

• Were any ESR relevant activities carried out during FY 2019–2022?
• Were Notifications and Reports filed where required?
• Were penalties imposed, appealed or paid?
• Are board minutes, CIGA documents and contracts available?
• Does the Corporate Tax file now cover substance, transfer pricing and Free Zone positions?

8) Vinstreak review process

Our ESR update review is designed for UAE SMEs, holding companies, free zone entities and groups that want certainty without unnecessary filings.

• Step 1: Entity and financial year mapping.
• Step 2: Historic ESR activity and filing review.
• Step 3: Penalty, appeal and refund-status review.
• Step 4: Corporate Tax and Free Zone substance alignment.
• Step 5: Management summary and action list.

9) Related services for complete compliance

A strong ESR review should not stand alone. It should connect with tax filing, bookkeeping, internal controls and business structure.