In 2019, the United Arab Emirates introduced Economic Substance Regulations (ESR) to enhance transparency and accountability. Its aim is to strengthen the country’s commitment towards global tax standards and tackle fiscal evasion. ESR needs businesses in Dubai engaged in specific activities to show a considerable economic presence.

It also requires businesses to demonstrate that their business activities are not solely tax-driven. Plus, it also imposes annual filing requirements on businesses, aiming to ensure that they maintain economic substance for each relevant activity. It can be extremely difficult for startups to keep up with Economic Substance Regulation in UAE. This is where professional TSAC comes in!
In this blog, we shall understand how ESR helps support transparency not only in the UAE but globally.
Financial Transparency
Economic Substance Regulation plays a vital role in maintaining financial transparency in the UAE by companies. It requires businesses to provide their detailed information about their business operations and channels of their income generation. This consists of details such as number of employees and workers, operating expenses and primary income generating activities.
Promote Fair Competition
ESR also helps in promoting fair competition among businesses within the same industry. It establishes a level field for every business, irrespective of their origin. There is the same set of rules and obligations for all considering tax responsibilities and economic activities. This further ensures that each company is competing based on merit, including the quality of their products and services.
Prevents Profit Shifting
Economic Substance Regulation in UAE also helps prevent profit shifting in the UAE. Profit shifting happens when multinational companies knowingly move their profits to lower tax regions from higher tax regions. ESR makes sure businesses fulfill their tax obligations, contributing fairly to the local economy in Dubai, UAE.
International Compliance
ESR also enhances international compliance. UAE positions itself as a responsible and accountable player in the global effort to fight against harmful tax practices.
Implementation of Economic Substance Regulation in UAE was a major step towards ensuring transparency and accountability on a global level. The ESR’s main objective is to fight tax avoidance by businesses and enhance transparency. The ESR applies to every mainland and free zone legal companies carrying out relevant business activities.
If you want to demonstrate genuine ESR of your business in Dubai, contact The Syndicate Advisors and Consultants (TSAC). We offer complete assistance and support when it comes to ESR in the UAE, guaranteeing your business is maintaining economic substance and complying with the regulations. Call us today!