Economic Substance Regulations in the UAE is a principle and law that requires a business license holder to adhere to Economic Substance Return on the gross income generated from their relevant activity. The ESR law for holding companies, along with other licensed companies, was adopted in 2019.

1. https://economicsubstanceregulations.com/esr-for-holding-company-business-in-uae/
ESR for holding Company Business in UAE

2. Introduction
Economic Substance Regulations in the UAE is a principle and law that requires a
business license holder to adhere to Economic Substance Return on the gross
income generated from their relevant activity.
The ESR law for holding companies, along with other licenced companies was
adopted in 2019
When it comes to filing tax and tax returns , certain companies wish to find
loopholes within the current law system to manipulate their financials.

3. Defining a Holding Company under the economic
substance regulations to uae
An entity in the UAE is considered a holding company when it meets the below
criteria.
The company holds inquiry interests in juridical persons.
It only earns dividends and capital gains from its equity investments.
Hence a company in the UAE that hold assets and has other income streams
apart from dividends and equity is not considered a holding company.

4. Economic Substance for a holding company
A holding company must comply with the regulations of the licensee.
Section 3 of the Relevant activities guide mentions the CIGA of any form such as
assets or dividends earned or any other source of income
Under section 3.7, it states Holding company is defined by its activity of only holding
an equity interest in one or several companies.
It generates its income from equity interests or derives dividends from the equity
investments.

5. Penalties for non compliance of ESR
● A fine of AED 50,000/- is levied for failing to conduct tests and submitting a
report in the first year.
● A fine of AED 400,000 is levied in the second year if the company fails to submit
the ESR report and conduct the tests.
● A separate fine of AED 50,000 is levied for providing inaccurate information to
the FTA.
● A fine of AED 20,000 in case of failure to submit a notification
● License revoked due to repeated non-compliance.

6. Four reasons why you or your company should have
a professional accountant services for ESR Filing
1. To accurately track & monitor the economic activities
2. To accurately manage the reporting and notification to Regulatory
Authorities
3. To provide you with better consultancy
4. To avoid conflict of Interest

7. Summary
An ESR test is a must for holding companies in the UAE
ESR consultants help you identify your holding companies relevant activities and
report the ESR Test notification.
If you’re looking for further information on how to prevent penalties for ESR
notification failure, Get in touch with us right away.

8. Contact Us
Call : +971 554828368
Whatsapp : +971 554828368
Mail : sales@farahatco.com
Landline : +97142500251
Visit : https://economicsubstanceregulations.com/e