Is ESR still required in the UAE? For financial years starting on or after 1 January 2023, no. Cabinet Decision No. 98 of 2024, effective 2 September 2024, removed the standalone Economic Substance Regulations filing. The substance principle did not vanish, though. It moved into the UAE Corporate Tax regime.
If a search result still tells you to file an annual ESR notification and report in 2026, it is out of date. This guide explains what changed, why the old filing is gone, and where the substance test lives now. It also covers the one area where the old rules still bite: the 2019 to 2022 financial years.
UAE Economic Substance Regulations
The standalone ESR filing: abolished for financial years from 2023
FY 2019 to 2022
REQUIRED
Annual ESR notification plus a full substance report. Missing it carried penalties, and those penalties still stand.
FY 2023 onward
ABOLISHED
No notification, no report. The standalone filing is gone. Penalties charged on these later periods are being refunded.
Cabinet Decision No. 98 of 2024, effective 2 September 2024, removed the filing. The substance test itself moved into UAE Corporate Tax.
Is ESR still required in the UAE in 2026?
No. For any financial year beginning on or after 1 January 2023, there is no ESR notification and no ESR report to submit. Cabinet Decision No. 98 of 2024 came into force on 2 September 2024 and removed the standalone filing obligation, as confirmed by the UAE Ministry of Finance.
So when someone asks, "is ESR still required in the UAE," the accurate 2026 answer is short. The separate Economic Substance Regulations return no longer exists for current financial years. What remains is the underlying idea behind it. Real business activity in the UAE must still be backed by real substance. That test now sits inside the corporate tax rules instead of a separate ESR portal.
This matters because the live search results are slow to catch up. Many pages were written before September 2024 and still frame ESR as an active yearly duty. It is not. Treat any 2026 checklist that asks for a fresh ESR filing as stale.
What the UAE Economic Substance Regulations were
The UAE Economic Substance Regulations began with Cabinet of Ministers Resolution 31 of 2019 and were reissued under Cabinet Resolution 57 of 2020. They applied to businesses carrying on defined "relevant activities," such as holding companies, financing and leasing, shipping, and intellectual property. In-scope entities had to file an annual notification and, where they earned relevant income, a full economic substance report.
The rules covered the financial years from 2019 through 2022. During that window, the annual filing was a genuine compliance duty, and missing it carried penalties. You can review the original framework on the UAE government portal. That history is the reason the topic still ranks: the regime was real, it was strict, and only recently was the standalone filing switched off.
Then versus now: ESR before and after 2023
The clearest way to see the change is to compare the two periods side by side. The regime did not simply disappear. It was retired for new years and folded into a broader tax framework.
| Aspect | FY 2019 to 2022 | FY 2023 onward |
|---|---|---|
| Standalone ESR filing | Required: notification plus report | Abolished |
| Legal basis | Resolution 31 of 2019, Resolution 57 of 2020 | Cabinet Decision 98 of 2024 removed the filing |
| Penalties for that period | Valid and still payable | Post-2022 penalties refunded by the FTA |
| Where substance is tested | The ESR regime itself | UAE Corporate Tax, via the QFZP test |
| Record retention | About 6 years | About 6 years |
The headline is simple. With the UAE Economic Substance Regulations abolished as a separate filing for 2023 onward, your annual paperwork drops. Your obligation to actually operate a substantive business does not.
Where the substance requirement lives now
The substance concept survived the change. It moved into the corporate tax system that the UAE introduced for financial years starting on or after 1 June 2023. If you want the full picture of that regime, our explainer on UAE corporate tax basics walks through the 9 percent rate, thresholds, and who is in scope.
The sharpest version of the new substance test applies to free zone companies chasing the 0 percent rate. To keep that rate, a business must qualify as a Qualifying Free Zone Person (a tax status that preserves the 0 percent rate on qualifying income). That status carries an adequate-substance requirement of its own: core income-generating activities performed in the free zone, adequate assets, qualified employees, and operating expenditure in the zone. Our guide to the QFZP adequate-substance test breaks down exactly what "adequate" means in practice.
In other words, the substance discipline that ESR used to police is now enforced through corporate tax. Major advisers reached the same reading of Cabinet Decision 98 of 2024, as set out in PwC Middle East's tax analysis. The filing changed. The expectation that your UAE company is a real operating business did not.
Where the substance test lives now
The ESR substance principle did not disappear. It moved.
Retired
Standalone ESR filing
Annual notification and report, abolished for financial years from 2023 onward.
Folded into
UAE Corporate Tax
The substance expectation now sits inside the corporate tax regime, not a separate portal.
Enforced by
QFZP substance test
Free zone companies keep the 0% rate only with adequate activities, assets, staff, and spend in the zone.
The filing changed. The expectation that your UAE company is a real, operating business did not.
What you still need to do for 2019 to 2022
Here is the part many owners get wrong. The abolition is not a clean slate for the past. Cabinet Decision 98 of 2024 removed the filing for 2023 onward, but the ESR obligations for the 2019 to 2022 financial years still stand.
That means three things in practice. First, any penalty imposed for non-compliance during 2019 to 2022 remains valid and payable. Only penalties charged for periods on or after 1 January 2023 are being refunded by the Federal Tax Authority. Second, you should keep your ESR records for about six years, because the FTA retains an audit window over those earlier periods. Third, if you registered for corporate tax and are catching up on filings, treat ESR history and corporate tax substance as one continuous story: our step-by-step on registering for corporate tax shows how the record-keeping overlaps.
So the answer to "is ESR still required in the UAE" splits by year. For current years, no filing is due. For the 2019 to 2022 window, the obligations and any penalties are still live.
