The short version
The UAE Economic Substance Regulations were repealed for financial years beginning on or after 1 January 2023. DIFC entities do not file ESR notifications or reports for those years. Obligations and penalties for the 2019 to 2022 periods remain live, and the substance concept now sits inside the corporate tax regime instead.
What was repealed and from when
Cabinet Decision No. 98 of 2024 cancelled the regime established by Cabinet Decision No. 57 of 2020, with effect for financial years beginning on or after 1 January 2023. For a DIFC entity with a December year end, the financial year ended 31 December 2022 was the last one in scope.
The repeal is prospective, which is a word doing a lot of work. It means nothing due for 2023 onwards. It does not mean a clean slate for what came before.
Why so much guidance is still wrong
ESR ran for four years and generated a large volume of published material: law firm briefings, corporate service provider checklists, compliance calendars. Very little of it was taken down or updated, and search engines still surface it prominently.
The result is that DIFC companies are routinely told by their providers to file an ESR notification for a year in which no such obligation exists. It is harmless in the sense that no penalty follows, but it creates a false sense that the substance question has been dealt with when it has not.
What still needs checking for 2019 to 2022
Penalties for those years remain enforceable and the authority retains its assessment powers. If an entity failed to file, the exposure has not evaporated. Anyone acquiring a UAE company should still ask about historic ESR compliance during due diligence, and open appeals continue on their own timetable.
Substance moved, it did not disappear
The thing ESR was testing, whether an entity genuinely operates where it claims to, is now tested under corporate tax. A DIFC entity claiming the 0 per cent rate as a Qualifying Free Zone Person must carry out its core income generating activities in the Free Zone with adequate full-time employees, adequate operating expenditure and adequate physical assets.
For an operating firm with an office and staff in the Centre, this is straightforward. For a lightly staffed holding vehicle it needs actual analysis, and the analysis is more demanding than the old ESR test it replaced.
Questions
Do DIFC companies still file ESR notifications?
No. The regime was repealed for financial years beginning on or after 1 January 2023. Any guidance requiring an annual ESR filing for those years is out of date.
Can I still be penalised for missed ESR filings from 2021?
Yes. The repeal operates prospectively and penalties, assessments and appeals for the 2019 to 2022 periods remain enforceable.