UAE Flag
+971 58 539 7665
Singapore flag
+65 9616 5641
Indian flag
+91 78994 42930
Colour Logo of Fortius Consulting Services

Filing ESR Assessment in the UAE- All You Need to Know

A person calculating taxes using a calculator
The UAE ESR (Economic Substance Regulations) took effect on April 30, 2019. The Ministerial Decision No. 215 of 2019 provided guidance on how to apply these regulations. According to the rules, businesses established in the UAE that participate in the tasks mentioned in the guidance must showcase adequate economic existence bypassing the economic substance test. Organizations must file an annual report to regulatory authorities whenever they handle the required operations in accordance with the legislation. To evaluate whether the economic substance test is passed, details of the income, activity, assets, and expenses must be provided. Companies must submit the yearly account to the authority at the end of the fiscal year, and you can get help from ESR consultation services. Let's take a look at a few key aspects of the UAE's annual disclosure laws under the Economic Substance Regulations and how to file an ESR assessment in detail here.

Learn How ESR Consultation Services Help You File ESR Assessment

As per Ministerial Decision No. 100 and Cabinet Resolution No. 57 of 2020, the National Assessing Authority conducts an ESR assessment to determine whether or not a business fulfills the economic substance test. It is a legal requirement for all businesses in the UAE, which lies under the understanding of related tasks as defined by the UAE ESR. These relevant activities primarily include distribution and service center operations, intellectual property operations, holding company operations, shipping operations, headquarters operations, lease/finance operations, investment fund management operations, insurance operations, and banking operations. Additional core income-generating activities are performed under all of these relevant activities; however, no CIGAs have been specified by the ministry in the decisions.

Working Procedure 

Economic substance regulations evaluation is a process that determines how well an entity has fulfilled the ESR test for the applicable fiscal year. You must understand the following points about how ESR consultation services will guide you through the assessment:

  • The National Assessing Authority performs the entire assessment at the end of the fiscal year.
  • The assessment process is carried out after completing the ESR notification and report.
  • The National Assessing Authority determines the extent to which the business meets the ESR test using the data provided by the company in the report and notification.
  • Under normal circumstances, the evaluating authority is given six years to complete the assessment following the conclusion of a single reviewable year.
  • The six-year timeframe is irrelevant if certain factors like gross negligence, misinterpretation, and fraudulent actions contribute to the process. If the process falls into one of these categories, the authority may be granted more time.
  • In the case of risky IP licensees, the jurisdiction will need more information before making a decision. If sufficient information is not provided, it may fail.

Following the completion of the assessment procedure, the National Assessing Authority will announce its decision to certify the licensee about whether or not they have met the ESR test.

Fortius is a consulting firm, a gateway to incredible business opportunities to transform and expand your global business footprint. With full-time, virtual or interim CFO services, we help you navigate all the financial obstacles and cash-flow challenges to achieve increased business profit and improved operational efficiency.

ERP implementation services outsourcing accounting and bookkeeping services Business advisory services
Business consulting Services Business setup consultant Outsourced CFO services
Corporate tax services Risk management consulting ESR consultation services
Financial feasibility consultants Management consulting services Mergers & acquisitions consulting
Tax planning and advisory services Tax compliance and advisory services VAT registration services

An Overview of Requirements to File ESR Assessment With the Help of ESR Consultation Services

ESR consultation services will help you pass the ESR assessment effortlessly. ESR regulations have established the following Assessing Authority requirements, which must be met to pass the ESR test successfully.

  • The licensee must carry out sufficient relevant and income-generating activities in the UAE.
  • The licensee must ensure that all activities are handled and carried out in the UAE. Every licensee carrying out a relevant activity must hire a sufficient number of workers for the business. They can be temporary or permanent, but they must be present in the UAE.
  • If a licensee outsources any income-generating tasks to an external agent, appropriate supervision and control must remain with the licensee and not with the external agent. These outsourced agents should be carrying out CIGAs on behalf of the licensee in the UAE.
  • It is critical for the licensee to fully engage in management activities, such as holding adequate meetings of the business's board of directors to enhance the state of the business. The presence of the board of directors is also required in meetings, as is the qualification of all directors for their positions. The meeting minutes must be signed and recorded in writing, and never leave the UAE.
  • The evaluation process can be carried out in the case of a license holder who has not obtained any income in a reportable period; however, such a licensee is not required to meet the ESR test.

Business professionals working on finance using a calculator.
A Detailed Insight About Licensees & Penalties 

Licensees who have been exempted for a relevant fiscal year are exempt from having to go through the evaluation process to fulfill the ESR test. Exempted licensees must only submit a notification and confirm their exemption status. If the licensee fails to present sufficient evidence to show its exempted position, the ESR test will be deemed as a failure. According to Cabinet Resolution No. 57, a licensee who fails to clear the assessment and the ESR test will be fined 50,000 AED. If a licensee continues to fail an ESR test for the second time in less than a year, he will be fined 400,000 AED.

More Information on Penalties 

Penalties will be imposed if relevant entities do not comply with the ESR disclosure rules. Penalties can range from 50,000 AED to 400,000 AED in the first fiscal period and close to 400,000 AED in successive financial periods. Get help from ESR consultation services to prevent facing penalties. During non-compliance with ESR, the penalties are mentioned below.

  • Providing Improper information- 50,000 AED
  • Failure to document ESR notification – 20,000 AED
  • Failure to document Economic Substance Report – 50,000 AED
  • Failure to clear the Economic Substance Test for the 1st year – 50,000 AED
  • Failure to clear the Economic Substance Test for the 2nd year – 400,000 AED

Businesses must begin precisely compiling and capturing information well in advance to avoid any last-minute rush, which will invariably coincide with the close of the fiscal year.

Also Read:Ways to Identify if Your Firm Falls Under ESR Norms

The Bottomline

Most business owners find ESR procedures challenging to understand, and as a result, they make mistakes during filing or reporting. As previously discussed, this results in severe penalties. Prefer Economic Substance Regulations to guide you through these procedures to keep your company from making big errors. Our skilled professionals at Fortius Consultation Services, one of the best business consulting services in the UAE, will never let you underperform at any phase of ESR.

Fortius Consulting Services is a trusted name for business consulting and CFO services in the UAE, Singapore and India. Through our expert consulting and advisory services,we assist organisations across the UAE & Asia to boost their profitability, improve operational effectiveness, increase management capability, institutionalise strategies, and upgrade their internal structures.


CFO Services
Tax Planning
Business Advisory
Management Consultancy
Financial Reporting & Compliance 
Cashflow Management
Mergers & Acqusition (M&A) Advisory


Email Us

Call Us

UAE  +971 58 539 7665   

SINGAPORE  +65 9616 5641 

INDIA  +91 78994 42930