What the Regime Required
The Economic Substance Regulations applied to UAE entities carrying on defined relevant activities. Broadly, an entity within scope had to submit an annual notification, and where it earned income from the relevant activity, an annual economic substance report demonstrating that the substance behind the activity was genuinely in the UAE — direction and management, core income-generating activity, adequate people, premises and expenditure.
The framework was compliance-heavy in a specific way: it applied by category of activity rather than by size or profitability, so entities with no revenue at all could still carry a notification obligation, and the annual cycle ran independently of anything else in the calendar. Nothing in the ordinary course of trading prompted it.
What Changed
Cabinet Decision No. 98 of 2024 amended Cabinet Decision No. 57 of 2020. Its effect is to cancel the notification and report requirements for financial years ending after 31 December 2022. For those years there is no notification to file and no report to submit.
A cancellation of the requirement — not a deferral of it, and not an extension of a deadline.
The reason is not obscure. The regulations were introduced to address concerns about entities booking income in the UAE without corresponding activity here. The federal corporate tax regime, which now applies to UAE businesses generally, addresses the same question through its own machinery. Running both in parallel would have imposed two overlapping substance regimes on the same entities.
Which Years Remain in Scope
The line is drawn by financial year end, not by calendar year, and not by when a filing was due. Obligations survive only for financial years ending on or before 31 December 2022. Everything ending after that date is out.
A 31 December year end. The years ending 31 December 2022 and earlier may carry surviving obligations. The year ending 31 December 2023 and everything after it does not.
A 30 June year end. The year ending 30 June 2022 ends on or before 31 December 2022, so it is in the surviving group. The year ending 30 June 2023 ends after 31 December 2022, so it is not.
Working out which of your own periods fall on which side of the line takes about a minute once you know your financial year end — and it is the first thing to establish before doing anything else described below.
What Survives for Those Years
Three things, and it is worth being precise about each.
Compliance for the years themselves. Where an entity was within scope for a financial year ending on or before 31 December 2022, its obligations for that year remain. A filing that was never made for such a year was not retrospectively excused by the 2024 amendment.
Responses to information and amendment requests. The regulatory authority or the Federal Tax Authority may still make information or amendment requests concerning those years, and an entity must still respond. A request of this kind arrives with its own response period, and that period governs regardless of the fact that no new filings arise.
Penalties imposed for those years. A penalty imposed in respect of a financial year ending on or before 31 December 2022 remains payable. It does not lapse because the regime that generated it was subsequently discontinued.
The Two Failure Modes
Still budgeting for filings that no longer exist. The clearest sign is an ESR line in an annual compliance budget, or a compliance calendar that still shows an ESR notification date. In some cases entities are still being invoiced for the preparation of filings that cannot be made. This costs money for nothing, and it crowds out the obligations that are genuinely live — corporate tax registration and filing, VAT, the beneficial ownership register.
Treating a pre-2023 penalty as extinguished. This is the more expensive error and it works quietly. The penalty sits against the entity. Nothing chases it in the ordinary course, so nothing prompts a decision. It then surfaces at the moment it is least convenient: a licence renewal, a liquidation, a bank review, a diligence exercise ahead of a sale or an investment.
By that point the timing has usually gone.
Routes for reconsideration on documented grounds run to defined periods. Whether a case exists at all depends on the authority and the circumstances.
There is a quieter version: an entity that was within scope for pre-2023 years and never filed at all, and has since concluded that the discontinuation dealt with it. It did not. That exposure is unresolved rather than closed, and unresolved exposure in this area becomes more difficult with time rather than expiring.
The filings stopped.
The years before didn’t close.
Check them, don’t assume.
No notification, no report — the requirement is cancelled, not deferred
Compliance, authority requests and penalties all survive
Financial year end — not calendar year, not filing date
Now lives in the corporate tax regime, including free zone qualifying status
Cabinet Decision No. 98 of 2024. Penalty amounts, the list of relevant activities and reconsideration periods are deliberately not reproduced here; each depends on the year and the authority.
What This Means for Your Compliance Calendar
Establish your financial year ends first. Which of your periods ended on or before 31 December 2022 determines everything else. Nothing after that date is in scope.
Take ESR out of the forward compliance calendar. For years ending after 31 December 2022 there is no notification and no report. If you are being quoted for one, ask which financial year it relates to.
Do not confuse “no new filings” with “nothing open”. Prior-year compliance, authority requests and penalties all survive.
Deal with an unresolved pre-2023 penalty deliberately. Establish what was imposed and for which year, then decide whether to pay or to contest on documented grounds. Deciding nothing is the option that reliably gets worse.
Keep the pre-2023 evidence. If a request arrives about one of those years, the substance evidence for it cannot credibly be created afterwards.
Expect the substance question to be asked elsewhere. It has not disappeared from UAE tax; it has moved into the corporate tax regime, including the conditions attaching to free zone qualifying status.
General information, not advice. Rules change, and how one applies to you depends on facts an article cannot know — this piece is dated 4 November 2026 and relies on Cabinet Decision No. 98 of 2024. The two year-end illustrations are generic calendar arithmetic. For your own position, tell us the situation.