For the implementation of guidelines set by the OECD (Organization for Economic Cooperation and Development) which is a component of BEPS (base aeration and profit shifting) for the CBCR (Country by Country Reporting) as an initiative taken by the industrial countries group.
For action 13 of the BEPs, the multinational group's Entities (MNEs) are under obligation to file Country by Country Reporting (CBCR) regarding corporate tax, worldwide income, profit before tax, collection of income tax, and several such other economic activity indicators present in any jurisdiction in which MNE works.
The Country-By-Country Reporting aims to bridge the inadequate information between the taxpayers and the tax authorities as to where economic value is achieved within the multinational corporation and whether it is consistent with where the profits are distributed and taxes paid throughout the world.
In the UAE, CbC reporting requirements apply to MNE groups with UAE headquarters starting from or after January 1, 2019. The latest was 31st 2020 under Decision No.44 of the council of 2020 to regulate reports submitted by multinational companies.
A report comprises information on Multinational Entities Groups both qualitative and quantitative data for instance gross profit, number of employees, detail of business etc. must be reported under three tables:
The headquarter group of UAE that meets the following criteria must comply with the CBC reporting legislation in UAE
For instance, by the end of 31 December 2019, on the gross income of Multinational Entity Groups for the financial period by end of 31s December 2018.
Case 1: - The total income of Multinational Entity Groups for the financial period by end of 31s December 2018 was AED 3.15 billion While meeting the threshold of income for the reporting year 2019 under the criteria of CBCR, the Multinational entities(MNE) groups were required to implement the reporting legislation set for CBCR purpose in the United Arab Emirates for 2019 reporting year.
Case 2: - The total income of Multinational Entity Groups for the financial period by end of 31s December 2018 was AED three billion (3000,000,000) While not meeting the threshold of income for the reporting year 2019 under the criteria of CBCR, the Multinational entities(MNE) groups were not required to implement the reporting legislation set for CBCR purposes in the United Arab Emirates for the 2019 reporting year.
While not meeting the income threshold for the reporting year 2019 under the criteria of CBCR, the Multinational entities(MNE) groups were not required to implement the reporting legislation set for CBCR purposes in the United Arab Emirates for the 2019 reporting year.
It will be translated into the functional currency stated by the MNE group. The year's average exchange rate should be used for a currency change.
The applicable rates are required to be described in Table three for Additional Information in respect of Country by Country Reporting.
Read more: What are the Corporation Tax Implications of the Transfer Pricing Rules?
For noncompliance to CBCR, there are prescribed penalties, against these penalties legal process has been given as mentioned below: -
The data of Permanent Establishment (PE) is required to be reported in respect of the location of tax jurisdiction and not in relation to the tax jurisdiction of the entity in which the property tax information is located which is a PE should exclude the financial information regarding the business place, for instance, United Arab Emirates is a subsidiary of a UK company, the CBC report should show related key figures i.e. profits, liabilities, and other indicators to the United Kingdom. The data for the company in the United Arab Emirates is to be provided after the information on the UK branch has been published.
It is essential for taxable persons to avail the services of top tax consultants in the UAE to have an in-depth understating of the implementation of CBC and to stay compliant with the UAE tax law and standards. Thus, contact us today and we shall be happy to assist you.
Ahmad Al Zain
Ahmad is an accomplished legal associate with more than 5 years of experience, he is adept in navigating the complex tax codes at federal, state and local levels. He has an immense aptitude for conducting tax investigations and tax litigation. He is well-versed in offering expert tax advisory and handling tax arbitration procedures in international and local jurisdictions. Further, he has comprehensive expertise in drafting a wide scope of tax documents and negotiating intricate tax disputes with the Federal Tax Authority.
Mostafa is a seasoned Tax Consultant with over 5 years years of experience gained in diverse taxations matters. He has vast expertise in settling tax disputes with the Federal Tax Authority and handling of tax procedures in compliance with tax laws. He is adept in investigating underlying tax intricacies and offering expert tax advisory. He is also well-versed in conducting tax analysis’s and negotiations with the Tax Regulators, upon tax preparation and filing. Mostafa specializes in the areas of Tax law, Auditing, Accounting and Banking law.