Author: Mahesh Maddu

The UAE Economic Substance Regulations (ESR) are no longer an active standalone compliance regime for financial years ending after 31 December 2022. Under Cabinet Decision No. 98 of 2024, businesses no longer need to file ESR notifications or reports for 2023 onwards. However, economic substance requirements still exist through the UAE Corporate Tax framework, especially for free zone businesses seeking Qualifying Free Zone Person (QFZP) status and the 0% Corporate Tax rate.

The UAE Corporate Tax regime does not automatically exempt free zone companies from tax. To access the 0% Corporate Tax rate, businesses must qualify as a Qualifying Free Zone Person (QFZP) under strict conditions. This guide explains the updated 2025 rules, qualifying activities, de minimis limits, substance requirements, and common compliance risks.

The UAE’s Cabinet Decision No. 129 of 2025 introduces major reforms to VAT and Excise Tax penalties, replacing compounding fines with a simplified non-compounding framework. This guide explains the nine amended violations, revised penalty calculations, voluntary disclosure rules, and what UAE businesses, free zone entities, and tax agents must do to stay compliant.