Economic Substance Regulations (ESR)
ESR require UAE entities engaged in specific activities to demonstrate adequate economic presence in the UAE, affecting free zone SPVs holding property or conducting relevant business.
| ESR Requirements | Compliance |
| Core income-generating activity | Must be managed in UAE |
| Adequate employees | Sufficient full-time staff in UAE |
| Physical presence | Office or premises in UAE |
| Operating expenditure | Appropriate UAE-based spending |
| Annual filing | ESR notification and report to authorities |
| Penalties for non-compliance | AED 50,000 plus potential entity deactivation |
| Relevant Activities | Property Context |
| Holding company | Property holding SPVs (relevant activity) |
| Immovable property | Direct property ownership (relevant) |
| Reduced ESR | May qualify for reduced requirements if passive |
| Mainland entities | Generally meet substance automatically |
| Free zone entities | Must demonstrate adequate substance |
| Professional advice | Legal and tax counsel essential |
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