LMKG Chartered Accountants

Economic Substance Regulations (ESR)

ESR is a regulatory framework implemented by various jurisdictions to ensure that businesses engaged in specific activities have substantial operations locally. Key features include:

  • Scope: Applicable to entities in specified sectors like banking, insurance, and fund management.

  • Substance Requirements: Entities must conduct core activities locally, meeting criteria like having qualified employees and physical assets.

  • Notification and Reporting: Mandates periodic reporting and notification of relevant authorities about activities.

  • Non-Compliance Consequences: Penalties, reputational damage, and potential removal from the register for non-compliance.

  • Review and Amendments: Ongoing reviews and potential amendments to align with international standards.

  • Expert Consultation: Businesses benefit from expert guidance to understand requirements, assess activities, and ensure compliance with ESR.

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