The Cabinet of Ministers issued Decision No. 98 (“Decision”), introducing key amendments to the United Arab Emirates (“UAE”) Economic Substance Regulations (“ESR”), which were established by Decision No. 57.
In particular, the amendments remove the duplication of economic substance requirements which previously existed in UAE legislation due to the presence of such requirements in the ESR and the Federal UAE Corporate Tax Law (“Federal Law”).
As a result of these amendments, companies in the UAE are exempt from ESR reporting obligations for financial periods starting on or after 1 January 2023. In addition, if administrative penalties were previously imposed for failure to file ESR reporting for these financial periods, such administrative penalties should be canceled, and any fines collected should be refunded. Meanwhile, substance requirements established in the Federal Law are effective for financial periods starting on or after 1 June 2023.
ESR reporting requirements remain in force for financial periods from 1 January 2019 to 31 December 2022, and companies in the UAE should ensure full compliance with them.
We continue monitoring changes related to taxation in the UAE and would be glad to discuss the potential impact of these changes on your business.
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