Everything You Need to Know About ESR in UAE

Everything You Need to Know about ESR in the UAE

Starting a business in the UAE is no easy task with all these procedures and regulations that one must comply with. When planning to start a business in the UAE, you must have come across ESR or Emirates Startup Regulations. In this article, we have curated Everything You Need to Know About ESR in UAE

Read on to understand the conditions and regulations startups in UAE must meet under the Emirates Startups Regulations.

Also read: How Can I Get a Mainland License in Dubai?

 

ESR or Emirates Startups Regulations in UAE

The ESR or Emirates Startups Regulations was introduced in 2014 with the goal to become one of the most startup-friendly countries in the world. These are a set of rules and regulations that govern how startups must operate in the Emirates region. 

If you have never heard about them or you have no idea about what ESR is and how important it is to comply with these rules and regulations, read this article to find out because it is important to learn and understand these regulations before starting a business in the UAE. 

These regulations provide various benefits to startups like reduced licensing fees and there are no minimum capital requirements or restrictions on foreign ownership. 

ESR in the United Arab Emirates stands for Economic Substance Regulations. These regulations make sure that all businesses operating in the UAE have enough economic presence in the country. 

These regulations were introduced in the United Arab Emirates in the year 2019. These rules and regulations are applicable to all the companies in the United Arab Emirates, except for some. 

If you want to continue operating your business in the city, then you must comply with all the rules and regulations that come under ESR. 

Listed below are some of the other regulations that they need businesses in the UAE to comply with:

 

  • Must Have a Physical Presence in UAE

Every country has its own requirements that must be met by entrepreneurs when starting a business anywhere in the world. The United Arab Emirates is one of the strongest countries in terms of its economy. Your startup or business must meet certain requirements to become legally eligible to operate a business in Dubai. 

First and foremost, all businesses must have a physical presence in the country in the form of an office, a warehouse, or any other space where the day-to-day activities of your business take place. 

Your employees must be based in the UAE and your business must ensure that it generates income with its economic activity only in the United Arab Emirates. This income generated within the UAE must be worthy enough for the company to be in the country. If your business has a really high income, you can take advantage of other entrepreneurs and businesses and help to grow their economy. 

 

  • Income-Generating Activity Must be Within UAE

As per the ESR, businesses must make money from their activities like production, selling, and providing services within the UAE. This rule was created in 2019 to make sure that the businesses were actually doing business within the country and not using the country as a home for their business. 

If businesses in the United Arab Emirates do not follow these regulations, they can suffer huge penalties from fines and even the revocation of their business licenses. So you must make sure that your business complies with all the Emirates Startups Regulations before operating a business in the UAE.

Also read: How to Start a Logistics Company in Dubai?

  • Must Have Employees Based in UAE

All businesses in the UAE must follow a set of rules and regulations to protect their employees. These rules that come under the ESR are called Employment Security Regulation which must be followed without fail.

One of the many rules that come under the ESR is that businesses must have a minimum number of employees based in the UAE. This is necessary to make sure that companies are not making their employees work too much without giving them proper time for rest and recovery. Employees must be provided with paid leave, health insurance, and end-of-service benefits so that the workers are treated fairly. This helps to make sure that they can live in the country without being afraid of abuse or exploitation. 

Businesses must create safe and fair working conditions for their employees which are possible by meeting these rules and regulations and regulating the maximum length of shifts, overtime hours, and breaks. 

 

  • Must Contribute to the Local Economy of the UAE

Another regulation that comes under the ESR is the Expenses Spend Ratio and it is one of the critical factors. Businesses operating in the UAE must prove that they are spending their income for the welfare of the country’s local economy. 

Businesses in UAE must keep a record of their earnings and spending and provide the documentation to the concerned authorities. 

 

  • Must Have Their Headquarters Set Up in UAE

The Emirates Startups Regulations help create a fair and square environment for businesses and ensures that they pay their fair share of taxes. For a business to meet these requirements, it must follow the rules and regulations that come under the ESR. 

Companies must keep accurate records of their incomes and expenses. They must also update about any changes in their ownership or structure to the concerned authorities. Failing to follow the rules can result in fines and penalties which can be a bad turn of events for your business. 

 

  • Must be Managed and Controlled by UAE

The Employment Nationalities Law that comes under the ESR requires all businesses to have Emirati nationals managing and controlling their businesses. The directors board of the company must be controlled by Emirati nationals and at least 51% of its corporate structure must be owned by Emiratis. 

Companies that do not follow such regulations are subject to restrictions like quotas on the number of foreign employees the company can hire. 

 

  • Must File an Annual Report 

Companies in the UAE must file an annual report to show the authorities about their compliance. This annual report is filed six months after the end of the financial year. It’s mandatory to keep an accurate record of your compliance as the concerned authorities can request these records anytime from the businesses. 

If businesses in the UAE want to run smoothly and legally in the country, then they must follow all the rules and regulations that come under the ESR, otherwise, the company will face penalties which include fines and even the revocation of the business license. 

Also read: How to Open a Retail Shop in Dubai?

Planning to Begin a Business in the UAE? 

Anyone planning to start a business in the UAE must learn and understand what ESR is and how to apply and comply with the rules and regulations. These regulations want businesses to have their physical presence and their headquarters within the UAE. Their income-generating activities must also be within the country and they should also contribute to the local economy of the country. 

The business must be controlled and managed by Emirati nationals, and an annual report must be submitted to the concerned authorities. 

A&A Associate can help you learn and understand these rules and regulations for business setup in Dubai. Contact A&A Associate for your queries and concerns regarding company formation in Dubai.

 

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