The UAE Economic Substance Regulations (ESR) previously required certain companies engaged in specific “Relevant Activities” to demonstrate adequate economic presence in the UAE, including maintaining employees, premises, and operational expenditure.
On 14 October 2024, the UAE Ministry of Finance introduced a significant reform to the ESR framework. Under the revised regulations, the ESR regime no longer applies to financial years ending after 31 December 2022.
As a result, companies incorporated in UAE free zones — including DMCC LLC entities — frequently seek clarification on whether they must still maintain employees or other elements of “adequate substance” to comply with ESR requirements.
- Cabinet Decision No. 57 of 2020 Concerning Economic Substance Requirements
- Cabinet Decision No. 98 of 2024 Amending the Economic Substance Regulations
These regulations established and later revised the UAE’s Economic Substance framework, which implemented international standards developed under the OECD Base Erosion and Profit Shifting (BEPS) in...