The Ministry of Finance (MOF), UAE, through Cabinet Resolution No. 44/2020, has revamped the guidelines for multinational entities (MNEs) operating within the UAE, replacing Resolution No. 32 of 2019. This resolution emphasizes the meticulous organization of reports submitted by MNEs, particularly focusing on Country-by-Country Reporting (CbCR) obligations.
The objective of Country-by-Country Reporting (CbC) is to eliminate any gap in data between taxpayers and tax authorities regarding where economic value is generated within the MNE group and whether it aligns with the distribution of gains and tax payments globally.
The Organization for Economic Co-operation and Development (OECD) under Action 13 of Base Erosion Profit Shifting (BEPS) requires that businesses maintain appropriate documentation in a three-tier structure where their related party transactions are. The value of the arm's length is greater than a certain limit. The relevant tax period and the same are reproduced in the UAE Corporate Tax Public Consultation Document.
The OECD Guidelines aim to achieve three main objectives:
Country by Country Reporting (CbCR) is framed under the directive that is consistent with the recommendation given by the Organization for Economic Co-operation and Development (OECD) on CbCR. The Resolution sets CbCR prerequisites through notification and filing for corporate bodies that are tax residents in the UAE.
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The scope encompasses entities that are tax residents in the UAE and are part of a multinational group of enterprises (MNE) that have consolidated revenues equal to or more than 3.15 AED billion in the financial year before the financial reporting year. If the UPE (Ultimate Parent Company) of the MNE is a UAE resident or if the UAE Resident CE (Constituent Entity) of the MNE group with a UPE outside the UAE as an Alternate Parent Entity (APE)/Surrogate Parent Company (SPE) has been assigned or if the MNE has a UAE resident CE who is neither a UPE nor an APE.
Article 4 of the Resolution states that the CbC report must be submitted within 12 months of the end of the reporting period. For example, for the financial year starting 1 January 2023, the CbC report must be submitted by 31 December 2024.
CbCR notifications must be submitted no earlier than the last day of the MNE's financial reporting year. Accordingly, for an MNE group's financial year commencing on 1 January 2019, the CbCR notification must be submitted to the UAE prior to 31 December 2019.
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A report containing quantitative and qualitative information about the MNE group. Information like revenue, profit, number of employees, business description, etc. should be reported under three tables:
The CbCR template requires that permanent establishment data be reported in respect of the concerned tax jurisdiction in which it is located. The procedures further require that the reporting template cover the financial year of the MNE group and declare the information consistently. The reporting MNE must invariably use the same data sources from year to year in completing the template and provide a succinct description of the data sources used in the preparation of the template in the supplementary information section of the template. If the data source has been changed, it should be disclosed accordingly in the Additional Information section.
Maintain effective records electronically in a compatible and readable format for 5 years after submitting the CbC report to the competent authorities.
Records will be maintained in English. If the record is kept in a language other than English, it requires to be translated into English on submission by the competent authority.
It is imperative for taxable persons to avail of the services of Tax Consultant Dubai to effectively implement the UAE corporate tax’s standards, to which noncompliance accrues hefty fines. Thus, contact us today and we shall be happy to assist you.
UAE Ministry of Finance CbCR Guidelines: https://mof.gov.ae/wp-content/uploads/2022/08/MoFCbCR-guidanceforcompliancewithCbCRregulations.pdf
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.