Most UAE businesses no longer have anything to file under the Economic Substance Regulations. Cabinet Decision No. 98 of 2024 limited ESR to financial years from 1 January 2019 ending on or before 31 December 2022, and there is no notification or report obligation for any financial year after 2022. If your financial year ends after 31 December 2022, there is nothing to submit and nothing to prepare, including for 2026.
What the decision does not do is remove the separate adequate-substance requirement that applies to a Qualifying Free Zone Person under the corporate tax rules. Those are different regimes, and substance still matters for corporate tax purposes. The sections below separate them, so you can stop filing what is not required without walking into a different problem.
What were the Economic Substance Regulations?
ESR was the UAE’s response to international pressure on arrangements that booked profit in a jurisdiction with no real activity behind it. It applied to licensees carrying on a defined list of relevant activities: banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution and service centre business.
The obligation ran in stages. You filed an annual notification declaring whether you carried on a relevant activity and earned income from it. If you did, you then filed an economic substance report demonstrating that the business was directed and managed in the UAE, that its core income-generating activities were performed here, and that it had adequate people, premises and expenditure.
What did Cabinet Decision No. 98 of 2024 change?
It narrowed the period the regulations apply to. ESR applies to financial years from 1 January 2019 ending on or before 31 December 2022, and no further. For financial years after 2022 there is no notification, no report, and no substance test to satisfy under ESR.
The decision also dealt with money. Administrative penalties relating to financial years after 31 December 2022 are cancelled, and amounts already collected for those periods are refundable. A business penalised for a filing failure in a period now out of scope is not merely forgiven; it may be owed the amount back.
The cancellation is specific to financial years after 31 December 2022, and does not extend to the years still in scope.
| Financial year | ESR notification | ESR report | Penalty position |
|---|---|---|---|
| From 1 January 2019, ending on or before 31 December 2022 | Within scope of the regulations | In scope where income arose from a relevant activity | Not affected by the cancellation |
| Ending after 31 December 2022 | No obligation | No obligation | Cancelled; amounts collected are refundable |
| Current and future years, including 2026 | No obligation | No obligation | No penalty can arise under ESR |
Do you need to file an ESR notification or report for 2026?
No. There is no ESR notification or report obligation for financial years after 2022, so nothing is due for 2026 regardless of your legal form, licence type or activity.
The test is your financial year end date. If it falls after 31 December 2022 you are outside the regime, and that holds for mainland, free zone and offshore entities alike, whether or not you ever filed in the years when ESR did apply.
If you are being quoted a fee for an ESR notification for the current year, you are being quoted for work that does not exist. Ask the adviser to put the obligation in writing before you pay.
Cancelled penalties and refundable amounts
The penalty provisions cut in your favour. A penalty relating to a financial year after 31 December 2022 is cancelled, so it is not a debt you need to settle, and any amount already collected for such a period is refundable.
So go back through your records. Look for any penalty notice or payment relating to a period after 31 December 2022, and check what was actually paid rather than what you remember being assessed. Clean accounting and bookkeeping records make this a short exercise.
If you did submit a notification or report for a period after 2022, treat the handling of that filing as a question for an adviser rather than something to assume.
Why are you still being told to file?
Because much of the material online has not been updated. Guides, service pages and some portal help text still describe the old regime in the present tense, complete with deadlines and submission steps. Search for “ESR UAE” and you will find confident instructions to file things nobody needs to file.
This is the part that catches businesses out, and it costs real money in recognisable ways.
- Paying for work that does not exist. Annual ESR notification and report packages are still being sold for current financial years. There is no obligation behind them.
- Settling a cancelled penalty. Owners receive a notice relating to a period after 31 December 2022, assume it is valid, and pay rather than question it.
- Leaving a refundable amount unclaimed. Nobody reconciles what was paid, so refundable money stays where it is.
- Concluding that substance no longer matters. The most expensive error on the list, and the next section deals with it.
Protecting yourself is straightforward. Check the position against the UAE Ministry of Finance rather than a third-party summary, and date-check anything you read. If a page does not mention Cabinet Decision No. 98 of 2024, it predates the change.
ESR substance and corporate tax substance are not the same thing
This distinction matters more than anything else on this page. ESR has been wound back; the adequate-substance requirement that applies to a Qualifying Free Zone Person under the corporate tax rules has not. They are separate regimes, and the end of your ESR filing obligation tells you nothing about your corporate tax position.
If your free zone entity relies on Qualifying Free Zone Person treatment, substance remains a live condition of it. People, premises, activity actually carried out in the UAE, and the ability to evidence all of it still have to hold up. A business that reads “ESR is over” and thins out its UAE presence can keep its licence in good standing and still lose the tax treatment it was structured around.
Your evidence base has not become less important, only differently directed. Board and management records, lease documents, payroll and visa records and a credible audit trail all still earn their keep. If you are choosing or reviewing a free zone company structure, substance belongs in that conversation from the start.
Common questions
Do I need to file an ESR notification this year?
No. There is no ESR notification or report obligation for financial years after 2022, so there is nothing to file for the current year.
Can I be penalised for never having filed under ESR?
Penalties relating to financial years after 31 December 2022 are cancelled. Financial years from 1 January 2019 ending on or before 31 December 2022 were within scope and the cancellation does not reach them, so if you had a relevant activity then, the position needs looking at properly.
I paid an ESR penalty. Can I get it back?
If it was collected in connection with a financial year after 31 December 2022, it is refundable. Find the notice and the payment record, confirm the period they relate to, and start there.
Does this mean substance no longer matters in the UAE?
No. The adequate-substance requirement for a Qualifying Free Zone Person under the corporate tax rules is a separate regime and is unaffected. Substance still matters for corporate tax purposes.
Why do so many websites still describe ESR filing as an annual requirement?
Because they have not been updated since Cabinet Decision No. 98 of 2024. Treat any guidance that does not reference that decision as out of date.
If you are unsure whether you carry an ESR exposure for the years still in scope, whether an amount you paid is refundable, or whether your free zone entity’s substance holds up for corporate tax purposes, we will work through it against your own documents rather than a template, and leave you with a clear list of what to do and what to stop doing. Speak to our Dubai compliance team to arrange a consultation.
This page sets out the position as at October 2026. Regulations change, and the requirements for any specific business depend on its own facts — confirm the current position before you act.
