UAE Economic Substance Regulations: Are ESR Filings Still Required in 2026, and Why Are Consultants Still Quoting for Them?

Start with the fact that decides everything else. Cabinet Decision No. 98 of 2024, effective 2 September 2024 and announced by the Ministry of Finance on 14 October 2024, cancelled the requirement to submit an Economic Substance Notification and an Economic Substance Report for financial years ending after 31 December 2022 [1]. It did not soften the rules or extend a deadline. It removed the filing obligation for those periods entirely.

It went further than that. Administrative penalties tied to those cancelled periods are cancelled, and penalties already paid are refunded, with the Federal Tax Authority acting as National Assessing Authority to annul what is pending and return what was collected, including in cases where an appeal had already been rejected [6][7][8]. If you paid an AED 20,000 or AED 50,000 ESR fine for a 2023 or 2024 period, that money is recoverable.

And yet UAE business owners are still being quoted for "annual ESR compliance" in 2026, often as a line bundled into a renewal package. Since 2013, our team has run the compliance calendar for hundreds of UAE companies, and this is now one of the most common items we strike off a client's quote before they sign. This guide is the honest version: what was cancelled, what genuinely remains, how to get your money back, and why official UAE government pages still read as though nothing changed. It is a guide, not legal or tax advice.

Is ESR still required in 2026?

For financial years ending after 31 December 2022, no. There is no Notification to file and no Report to file, and no penalty for not filing them [1][6][7]. For financial years falling in the 2019 to 2022 window, the obligations were never cancelled and remain enforceable. So the answer depends entirely on which financial year the filing relates to.

That distinction resolves almost every argument on this subject. A consultant saying "ESR is cancelled" and one saying "ESR is still enforceable" can both be right, because they are talking about different years. What is not defensible is quoting for a recurring annual ESR filing in 2026, because there is no 2026 filing to make.

Real Talk: If someone has invoiced you for an ESR notification covering a financial year ending 31 December 2023, 2024 or 2025, ask them to point to the submission confirmation from the portal. For a post-2022 period there is nothing to submit, so there is nothing to show you.

What exactly did Cabinet Decision No. 98 of 2024 do?

It amended Cabinet Resolution No. 57 of 2020 so that the notification and report requirements stop applying to financial years ending after 31 December 2022, cancels administrative penalties imposed for those periods, and provides for refunds of penalties already paid [1][6][7][8]. The decision took effect on 2 September 2024 and was publicly announced by the Ministry of Finance on 14 October 2024 [1].

The cleanest way to hold this in your head is by financial year end.

Note the cut-off is the financial year end, not the start. A company with a 30 June year end is out of scope from its year ended 30 June 2023 onwards, because that year ended after 31 December 2022. A company with a 31 December year end has 2022 as its last in-scope year.

Honest sourcing note. The Ministry of Finance news release announcing the amendment does not foreground the refund mechanism as plainly as the professional-firm alerts do [1]. The refund position, including the annulment of pending penalties and the return of paid penalties in rejected-appeal cases for post-2022 periods, is stated consistently across the alerts published by PwC, K&L Gates and Clyde and Co on the primary Cabinet Decision [6][7][8]. We are telling you where that comes from rather than presenting it as a headline from a government page, because it is not one.

What is still required for financial years 2019 to 2022?

Everything that was required before. Notifications and reports for periods from 1 January 2019 to 31 December 2022 remain due, remain enforceable, and any regulator information request or amendment request tied to those years still has to be answered [1][6][7]. Cabinet Decision No. 98 of 2024 is forward-facing from the 2022 year end and does not forgive a historical gap.

The Ministry of Finance ESR portal at esr.mof.gov.ae keeps operating for exactly this reason: to hold historical filings and support regulator correspondence about them [2][3]. That is routinely misread as evidence ESR is still live. It is evidence the 2019 to 2022 years are still live.

So there are only three pieces of legitimate ESR work left in 2026.

Common Mistake: Assuming the cancellation is retroactive to the start of the regime. It is not. We have seen owners cheerfully ignore an open 2021 report because "ESR was scrapped". The scrapping does not reach back to 2021, and the exposure stays on the file.

How do you recover an ESR penalty you have already paid?

Through the Federal Tax Authority as National Assessing Authority, which annuls penalties still pending and returns penalties already collected for the cancelled periods, including where an appeal had previously been rejected [6][7][8]. This is not a discretionary appeal on the merits. It follows from the cancellation of the underlying obligation.

Before approaching anyone, get the file straight. Establish in writing which financial year each penalty relates to, because that is the only fact deciding whether it is cancelled or still owed.

Quick Math: A company that missed both filings for its year ended 31 December 2023 could have been assessed AED 20,000 for the notification and AED 50,000 for the report, so AED 70,000 in total. Both relate to a financial year ending after 31 December 2022. Both fall away, and if they were paid, both are refundable [6][7]. That is a real number sitting in a lot of UAE companies' accounts as a written-off cost.

Working out whether your penalties sit inside or outside the cancelled window is a twenty minute exercise on your own records, not a project. Our post-setup services team reviews penalty history alongside the corporate tax and VAT position, because an unresolved ESR fine usually sits next to other loose compliance ends. Talk to a setup expert→

Why do UAE government pages still say ESR is a live annual obligation?

Because the general information pages were written under the old regime and have not been rewritten to reflect Cabinet Decision No. 98 of 2024. This is the single biggest reason business owners keep being told ESR is current, and it is worth stating plainly rather than pretending the official web estate is consistent.

Here is what those pages actually say, and it is not a small discrepancy.

This is not a conspiracy, and it does not mean the cancellation is somehow partial. It is stale web copy, which every large organisation accumulates. But it has a real commercial consequence: an owner who checks u.ae or the Ministry of Economy and Tourism page to sanity-check a consultant's quote finds apparent confirmation that annual ESR filings are due, and signs [4][5].

Pro Tip: Rely on the instrument, not the information page. Cabinet Decision No. 98 of 2024 amends Cabinet Resolution No. 57 of 2020, and a general guidance page cannot override an amending Cabinet Decision. When an adviser cites a government page at you, ask them to show you where that page addresses Cabinet Decision No. 98 of 2024. Usually it does not mention it at all.

Based on our experience, the most effective single question a business owner can ask is this: "Which financial year is this filing for?" An adviser doing legitimate remedial work will answer instantly with a year between 2019 and 2022. An adviser selling a recurring service will answer with the current year, or will answer with something about staying compliant.

What was the original ESR regime, for the years that still matter?

Cabinet Resolution No. 57 of 2020, issued 10 August 2020, replaced Cabinet Resolution No. 31 of 2019 of 30 April 2019 and governed the regime for the periods that remain enforceable [2][3][4]. It applied to UAE licensees carrying on any of nine Relevant Activities, requiring them to demonstrate adequate substance in the UAE and to file, and it is the instrument Cabinet Decision No. 98 of 2024 amends.

The nine Relevant Activities are the gateway. If a licensee carried on none of them in a period, it was outside the reporting obligation for that period.

Two mechanics still govern how a 2019 to 2022 filing is judged. The first is the Core Income Generating Activity test: a licensee had to show that the significant activities actually generating the income were carried out in the UAE, with adequate people, premises and expenditure, and directed and managed in the UAE. The second is exemption, available in defined cases, for example where the licensee earned no income at all from a Relevant Activity in the period. Exemption did not remove the notification, which is where many historical gaps come from.

Common Mistake: Believing that an exempt licensee had nothing to do. Exempt status generally still required a notification with evidence supporting the exemption. "We were exempt so we did not file" is the most common reason we find an open 2020 or 2021 item on an otherwise clean file.

The two deadlines everyone collapses into one

They are separate triggers. The Economic Substance Notification was due within 6 months of the end of the financial year, and the Economic Substance Report was due within 12 months of the end of the financial year [2][3][4]. Most summaries mention a single annual deadline, which is wrong and which is why licensees filed the notification, felt finished, and missed the report six months later.

The report was also conditional in a way the notification was not. A licensee that carried on a Relevant Activity but earned no income from it, or was exempt, generally had a notification duty without a report duty. So the two filings were not simply the same task twice.

Real Talk: When we review a historical ESR position, the notification is usually there and the report is usually not. If you are auditing your own file for the 2019 to 2022 years, check the report first. That is also the more expensive of the two failures.

What were the ESR penalties under the original regime?

Under Cabinet Resolution No. 57 of 2020 the headline figures were AED 20,000 for failure to file or late filing of the notification and AED 50,000 for failure to file the report or for providing inaccurate information, with a substantially higher figure for repeat failure in the immediately following financial year [4][6][7]. These penalties remain live for the 2019 to 2022 periods and are cancelled for the periods after them.

A sourcing flag on the AED 400,000 figure. We are reporting it as it appears in secondary legal commentary on the regime rather than as a figure we have independently confirmed against the primary penalty annex [6][7][8]. If a repeat-failure assessment is actually on your file for a 2019 to 2022 period, get the exact amount from the assessment itself rather than from any guide, including this one.

The information-exchange limb matters more than the money for some groups. Where a licensee failed the substance test or repeated a failure, information could be exchanged spontaneously with the competent authority of the foreign parent or the ultimate beneficial owner's jurisdiction. That is an international-tax consequence rather than a UAE administrative one, and a further reason not to leave a historical gap open.

What is corporate tax substance, and why is it not ESR under a new name?

They are different obligations under different laws with different consequences. ESR sat under Cabinet Resolution No. 57 of 2020 and was enforced through a standalone filing on the MOF ESR portal. Corporate tax substance sits under Federal Decree-Law No. 47 of 2022 and its Cabinet Decisions, for financial years starting on or after 1 June 2023, and is enforced through the tax return on EmaraTax [9].

The confusion is understandable because both regimes use the phrase Core Income Generating Activities. That shared term is the single biggest reason people believe ESR simply continued under a new label. It did not. The same words are doing different jobs in different statutes.

Read the last two rows together. An ESR failure cost a fixed administrative fine. A corporate tax substance failure costs the 0% rate, which for a profitable free zone company is a far larger number with a multi-period tail. So if you have been treating the ESR cancellation as a general relaxation of UAE substance expectations, reverse that reading: the filing went away and the substance expectation moved into a law with sharper teeth. Our corporate tax filing requirements guide covers the return mechanics, and our guide to the EmaraTax portal covers where that filing happens.

What does a Qualifying Free Zone Person actually have to do instead?

Under Article 8 of Cabinet Decision No. 100 of 2023, a Qualifying Free Zone Person must undertake its Core Income Generating Activities in a Free Zone or a Designated Zone, with adequate assets, an adequate number of qualified full-time employees and an adequate amount of operating expenditure, having regard to the level of activities carried on [9]. This is a condition of the 0% rate, not a filing, and it is tested through the return rather than through a substance portal.

Outsourcing is permitted, within limits that mirror the ESR language closely enough to be another source of confusion.

"Adequate" is deliberately relative, judged against your own level of activity, with no published headcount or floor-area minimum. A company invoicing large sums from a desk with no staff has an adequacy problem that a small operating company does not. For the full treatment of the conditions, the closed activity list and what one breach costs, see our guide to the qualifying free zone person and the 0% rate.

Pro Tip: If your file contains a well-built ESR substance analysis from 2021 or 2022, do not throw it away, and do not assume it transfers either. The evidence of premises, staff, expenditure and decision-making is reusable. The legal test it was written against is not. Re-map that evidence to Article 8 of Cabinet Decision No. 100 of 2023 rather than filing the old memo as though it answers the new question.

Zone choice sits underneath all of this, because substance is far easier to hold where the licence, the premises and the staff visas match the activity, which is what our free zone company setup page covers.

Transfer pricing is a third track, separate again

Transfer pricing under the corporate tax law is its own obligation, with its own arm's length standard, documentation expectations and disclosure inside the return [9]. It is not part of ESR and it did not replace ESR. It is a third thing that applies to any UAE company with related-party dealings, whether or not that company was ever a Relevant Activity licensee.

The practical point when reviewing a quote is that these three tracks have different populations. A small trading company with no related parties may have almost no transfer pricing work and no ESR history at all, while a group holding company may have years of ESR filings and a real transfer pricing file. Do not let a quote blend them into one undifferentiated "substance and compliance" fee. Our guide to transfer pricing in the UAE covers the thresholds and documentation, and the annual audit question is dealt with in do all UAE companies need an audit.

How to tell whether an adviser is selling you something you do not need

Ask which financial year the work covers, then read the quote line by line. Legitimate ESR work in 2026 names a year between 2019 and 2022, or it is a penalty recovery. Anything described as annual, recurring, renewal-linked or "for the current year" describes an obligation that no longer exists.

Quick Math: A recurring ESR service quoted at AED 2,500 a year across three years of filings that were never due is AED 7,500 spent on nothing. Put that beside a refundable AED 70,000 penalty for the same period that nobody told you was recoverable, and the cost of not asking which year the work covers becomes obvious.

Most advisers still quoting for this are not acting dishonestly. They built a compliance calendar in 2020, the government information pages still describe the obligation, and nobody re-read the amending decision. That is precisely why the burden of asking the year question falls on you.

What should you do if you never filed for 2019 to 2022?

Do not ignore it, because those obligations were not cancelled [1][6][7]. Establish which periods you actually carried on a Relevant Activity, which filings are missing, whether any penalty has already been assessed, and whether the shortfall is a notification, a report or both. Then take advice on the right way to approach it, rather than filing something inaccurate to close the gap quickly.

Resist the urge to file a late 2020 notification from figures reconstructed from memory, on the theory that any filing beats no filing. Inaccurate information was itself a penalised failure under the original regime, so rebuild the position from the financial statements and the contracts first.

If your structure is mainland rather than free zone, the ESR position is identical, because the regime followed the Relevant Activity and not the licence type. What differs is what comes next: a mainland company has no Qualifying Free Zone Person substance test to satisfy, so its live obligations are the ordinary corporate tax return, transfer pricing where relevant, and accounting records. Our mainland company setup page sets out what that involves, and firms whose own business is advising on this can read our guide to accounting and tax consultancy setup.

Stop paying for a filing that no longer exists

The position in 2026 is simple once the years are separated. Nothing is due under ESR for any financial year ending after 31 December 2022, penalties for those years are cancelled and refundable, and the only real work left is historical clean-up or getting your money back [1][6][7][8]. Everything else being sold as ESR is either a corporate tax substance obligation wearing the wrong label, or it is nothing at all.

Since 2013, BusinessDubai.ae has completed 700+ company registrations across the UAE, and the compliance calendars we run for those clients no longer carry an ESR line for current periods, because there is not one to run. We will tell you which financial years still carry an obligation, whether a penalty on your file is cancelled or genuinely owed, and what your live corporate tax substance position looks like now the filing regime has gone. The ongoing side, the returns, the audit and the renewals, is what our post-setup services team handles, and the structuring side, whether a free zone company setup or a mainland company setup, is where a defensible substance position is built or lost. Talk to a setup expert→

Real Client Stories

Real examples from businesses we have helped, with details changed for privacy.

The trading company invoiced for 2026 ESR compliance. A Dubai free zone trading company brought us a renewal quote with an "annual ESR notification and report" line at AED 3,200, presented as mandatory. Its financial year ends 31 December, so its last in-scope year was 2022 and nothing had been due since [1]. When we asked the provider which financial year the filing covered, the answer was the current one. The line came out of the quote, and the same question removed a similar line from the following year's renewal.

The AED 70,000 penalty that was never owed. A group services company was assessed AED 20,000 for a missed notification and AED 50,000 for a missed report, both for its financial year ended 31 December 2023, and paid them to clear the file before a bank review. Both relate to a year ending after 31 December 2022, so both sit inside the cancelled window and are refundable [1][6][7]. We rebuilt the penalty references and payment evidence and took it forward as a cancellation and refund matter rather than an appeal on the merits, because the obligation itself had been removed.

The holding company with a real 2021 gap. An investment holding company had been told ESR was "scrapped" and had stopped worrying about a report it never filed for its 2021 financial year. That year ended before the cut-off, so the obligation stood [1]. We rebuilt the position from the audited accounts and shareholding records rather than filing quickly from memory, since inaccurate information was itself penalised, and separately re-mapped its substance evidence to the corporate tax test that now applies [9].

Frequently Asked Questions

Are ESR filings still required in the UAE in 2026?

Not for financial years ending after 31 December 2022. Cabinet Decision No. 98 of 2024 cancelled the Economic Substance Notification and the Economic Substance Report for those periods [1][6][7].

What is Cabinet Decision No. 98 of 2024?

An amendment to Cabinet Resolution No. 57 of 2020, effective 2 September 2024 and announced by the Ministry of Finance on 14 October 2024, cancelling the ESR filings and related penalties for financial years ending after 31 December 2022 [1].

Were ESR fines cancelled as well as the filings?

Yes. Administrative penalties imposed for the cancelled periods are annulled, and penalties already paid are refunded, with the Federal Tax Authority acting as National Assessing Authority [6][7][8].

Can I get a refund of an ESR fine I already paid?

If it relates to a financial year ending after 31 December 2022, yes. The refund position is reported consistently by PwC, K&L Gates and Clyde and Co on the primary decision [6][7][8].

What if my ESR appeal was already rejected?

For a post-2022 period that does not block recovery. The reporting on the decision states that paid penalties are returned including in rejected-appeal cases relating to those periods [6][7].

Do the 2019 to 2022 ESR obligations still apply?

Yes. Cabinet Decision No. 98 of 2024 applies only from financial years ending after 31 December 2022, so notifications and reports for 2019 to 2022 remain due and enforceable [1][6].

Is the MOF ESR portal still open?

Yes, at esr.mof.gov.ae, for historical filings and regulator correspondence about the 2019 to 2022 periods [2][3]. Its being open is not evidence that current-year filings are due.

Why does the u.ae government page still describe annual ESR filings?

Because it has not been updated for the amendment. The page was last updated 22 May 2025 and still sets out the annual notification and report duties [4]. Stale copy, not a live obligation.

Does the Ministry of Economy and Tourism page say ESR is still required?

Its ESR page describes filings as an ongoing annual obligation for all financial periods [5]. That framing predates the amendment, so rely on Cabinet Decision No. 98 of 2024 instead [1].

Which financial year end is the cut-off?

Financial years ending after 31 December 2022 are cancelled. A 31 December year end means 2022 was the last in-scope year. A 30 June year end means the year ended 30 June 2023 is already out of scope [1].

What were the nine Relevant Activities?

Banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution and service centre business [2][3][4].

What were the two ESR deadlines?

The notification was due within 6 months of financial year end and the report within 12 months. Two separate triggers, which is why many licensees filed the first and missed the second [2][3][4].

What was the penalty for missing an ESR notification?

AED 20,000 for failure to file or late filing, and AED 50,000 for failure to file the report or providing inaccurate information, under the original regime [4][6][7].

What was the repeat-failure penalty?

Secondary legal commentary reports AED 400,000 for repeat failure in the immediately following financial year, plus spontaneous information exchange with the relevant foreign competent authority. We flag this as secondary-sourced [6][7][8].

Did ESR become corporate tax substance?

No. Corporate tax substance is a different obligation under Federal Decree-Law No. 47 of 2022 and Cabinet Decision No. 100 of 2023, enforced through the tax return rather than an ESR filing [9].

Why do both regimes use the phrase Core Income Generating Activities?

Both borrow the same term, which is exactly why people assume ESR continued. The words are the same, the statutes, the triggers, the portals and the consequences are not [9].

What does Article 8 of Cabinet Decision No. 100 of 2023 require?

A Qualifying Free Zone Person must conduct its Core Income Generating Activities in a Free Zone or Designated Zone with adequate assets, adequate qualified full-time employees and adequate operating expenditure [9].

Is corporate tax substance a filing?

No. It is a condition of the 0% rate, tested through the corporate tax return on EmaraTax. There is no separate substance portal and no separate substance submission [9].

Can a Qualifying Free Zone Person outsource its core activities?

Yes, within limits. Ordinary CIGAs may be outsourced within a Free Zone or Designated Zone under adequate supervision, and Qualifying Intellectual Property CIGAs more broadly, again with supervision [9].

What happens if a QFZP fails the substance condition?

It risks losing the 0% rate or facing a tax assessment, which is a very different consequence from a fixed ESR administrative fine [9].

Is transfer pricing part of ESR?

No. Transfer pricing is a separate track under the corporate tax law, with its own arm's length standard and documentation expectations, applying regardless of any ESR history [9].

I never filed ESR for 2020. What should I do?

Establish whether you actually carried on a Relevant Activity that year, identify whether the notification, the report or both are missing, and take advice before filing. The obligation was not cancelled [1][6].

Does the cancellation apply retroactively to 2019 to 2022?

No. That is the most common misreading. The cancellation runs forward from financial years ending after 31 December 2022 and leaves the earlier years fully intact [1].

Did exempt licensees still have to file?

Under the original regime, exempt status generally still required a notification with evidence supporting the exemption. Many historical gaps come from assuming exemption meant nothing to file.

Can I file a late 2021 notification from estimated figures?

That is a bad idea. Providing inaccurate information was itself a penalised failure under the original regime, so reconstruct from the financial statements and contracts before submitting anything [4].

Does ESR apply to mainland companies as well as free zone companies?

It followed the Relevant Activity rather than the licence type, so both could be in scope for the 2019 to 2022 periods. What differs now is the corporate tax substance position, which is a free zone concept [9].

My consultant says ESR is still mandatory. How do I check?

Ask which financial year the filing covers. If the answer is a current year, ask them to address Cabinet Decision No. 98 of 2024 directly, and ask for a portal submission confirmation [1].

Does the ESR cancellation reduce my overall UAE compliance load?

Less than it sounds. One filing regime went away while corporate tax, transfer pricing and, for many companies, an audit requirement arrived. The direction of travel is not lighter [9].

Where should I look for the authoritative position?

Cabinet Decision No. 98 of 2024 and the Ministry of Finance news release announcing it [1]. General information pages on MOF, u.ae and the Ministry of Economy and Tourism have not been rewritten to reflect it [2][4][5].

References

[1] Ministry of Finance. Ministry of Finance announces amendment to Cabinet Decision on economic substance requirements. The amendment to Cabinet Resolution No. 57 of 2020, effective 2 September 2024, announced 14 October 2024, cancelling the Economic Substance Notification and Economic Substance Report for financial years ending after 31 December 2022 and cancelling related penalties. MOF announcement of the amendment

[2] Ministry of Finance. Economic Substance Regulations. General ESR page describing the notification and report duties in the present tense, and listing Cabinet Decision No. 98 of 2024 among the legal framework instruments without restating its effect in the body copy. Cited both for the original regime and as evidence of the stale framing. MOF Economic Substance Regulations

[3] Ministry of Finance. Economic Substance Regulations (ESR) under public finance and international relations. Same present-tense description of the annual obligations, and the reference point for the ESR portal at esr.mof.gov.ae used for historical filings. MOF ESR, international relations

[4] UAE Government portal. The Economic Substance Regulations. Sets out the nine Relevant Activities, the 6 month notification deadline, the 12 month report deadline and the penalty figures. Page last updated 22 May 2025 and still framed as a live annual obligation. u.ae, the Economic Substance Regulations

[5] Ministry of Economy and Tourism. Economic Substance Regulations. Describes ESR filings as an ongoing annual obligation for all financial periods, which is the framing that predates Cabinet Decision No. 98 of 2024. Ministry of Economy and Tourism, ESR

[6] PwC Middle East. Cabinet of Ministers issued Decision No. 98 of 2024 on UAE Economic Substance Regulations. Tax alert on the primary Cabinet Decision, covering the cancellation of the notification and report for financial years ending after 31 December 2022, the cancellation of penalties and the refund of penalties already paid. PwC alert on Cabinet Decision No. 98 of 2024

[7] K&L Gates. Update: Economic Substance Regulations Filings Cancelled, 31 October 2024. Covers the cancellation, the role of the Federal Tax Authority as National Assessing Authority in annulling pending penalties and returning paid penalties, including rejected-appeal cases for post-2022 periods, and the original penalty figures. K&L Gates, ESR filings cancelled

[8] Clyde and Co. UAE Economic Substance Regulations, October 2024. Third convergent account of the effect of Cabinet Decision No. 98 of 2024, relied on here together with [6] and [7] for the refund position, which is not foregrounded on the Ministry of Finance consumer-facing page. Clyde and Co, UAE Economic Substance Regulations

[9] Ministry of Finance. Cabinet Decision No. 100 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Person. Article 8 on adequate substance, requiring Core Income Generating Activities in a Free Zone or Designated Zone with adequate assets, qualified full-time employees and operating expenditure, and setting the outsourcing conditions for ordinary and Qualifying Intellectual Property CIGAs. Issued under Federal Decree-Law No. 47 of 2022. Cabinet Decision No. 100 of 2023