UAE’s commitment as a member of the OECD Inclusive framework and in response to the European Union code of conduct group on taxation’s assessment of UAE’s tax framework, the UAE’s Government has provided guidance on the application of the ESR in September 2019, under which businesses engaged in “Banking, Insurance, Investment Fund Management, Leasing, Headquarters, Holding company, Shipping, Intellectual Property (IP), and Distribution & Service Centre” activities will be required to comply. The regulation became effective on January 1, 2019.

Entities that pass the Economic Substance Test must provide the following to their respective regulatory authority:

-Annual notification form

-Economic Substance Report within 12 months from the end of their financial year

The Economic Substance Report is not required to be submitted by exempt entities or entities that did not generate revenue from relevant activities during the fiscal year. However, they are required to submit the Annual notification form to the appropriate authority.