UAE businesses no longer file Economic Substance notifications or reports for financial years starting on or after 1 January 2023. Cabinet Decision No. 98 of 2024 ended the regime from then and cancelled penalties for later years. Years from 2019 to 2022 remain subject to the old rules, and substance still matters for tax.
What did Cabinet Decision No. 98 of 2024 do?
It amended the Economic Substance Regulations so they no longer apply to financial years starting on or after 1 January 2023. Penalties for those later years are cancelled and amounts collected are to be refunded (PwC Middle East).
Which years are still covered?
Financial years from 1 January 2019 to 31 December 2022 (PwC). Open notifications, reports or penalties for those years still need to be closed.
“will no longer be able to benefit from the Free Zone Corporate Tax regime”
Does substance still matter?
Yes, under corporate tax. A Qualifying Free Zone Person must have adequate substance in the zone to keep 0%, and losing qualifying status means standard rates for five years (Ministry of Finance via WAM). Treaty partners also look for substance before granting relief.
What should businesses do now?
Close out any 2019 to 2022 filings, claim refunds of later-year penalties, and document substance under the corporate tax rules: people, premises, decisions taken in the UAE and core activities performed here.
A short timeline
| Period | Position |
|---|---|
| Financial years 2019 to 2022 | ESR applies: notifications, reports and penalties remain valid |
| Financial years starting on or after 1 January 2023 | ESR no longer applies; penalties cancelled |
Source: PwC on Cabinet Decision No. 98 of 2024.
What to tidy up now
Check the ESR portal for open items from 2019 to 2022, settle or appeal any valid penalties for those years, and request refunds of penalties for later years. Then move the substance file into your corporate tax records: board minutes held in the UAE, staff and premises, and evidence that core income-generating activities happen here.
Frequently asked questions
Do I file an ESR report for 2024?
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No. Financial years starting on or after 1 January 2023 are outside the regime.
Will ESR penalties for 2023 be refunded?
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Penalties for years after the ESR period are cancelled; check the FTA refund process.
Is substance still checked for free zones?
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Yes, as a condition of Qualifying Free Zone Person status.
Does ESR abolition affect my free zone tax status?
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No directly, but substance is still a condition for Qualifying Free Zone Person status.
Sources
- Cabinet Decision No. 98 of 2024 amending the UAE Economic Substance Regulations — PwC Middle East. Checked 17 October 2026.
- Ministry of Finance announces new decisions relating to Corporate Tax for Free Zones (Cabinet Decision No. 55 of 2023, Ministerial Decision No. 139 of 2023) — WAM, Emirates News Agency. Checked 16 October 2026.