Introduction:
Cabinet Resolution No. 44/2020, which replaced Resolution No. 32 of 2019 has recently updated the regulations for multinational enterprises (MNEs) that are carrying out the business operations in the United Arab Emirates. This resolution contains the information why there is the need of MNEs to organize their reports meticulously, with a solid consideration on their obligations for Country-by-Country Reporting (CbCR).
The purpose of country-by-country reporting:
The goal of Country-by-Country Reporting (CbC) is to close any information gaps between tax authorities and taxpayers on the location of economic value creation inside MNE groups and whether they correspond with gains and tax payments distributed internationally.
Under Base Erosion Profit Shifting (BEPS) Action 13, the Organization for Economic Co-operation and Development (OECD) mandates that companies keep the relevant records in a three-tiered structure where their related party transactions take place. The arm’s length value exceeds a predetermined threshold. The UAE Corporate Tax Public Consultation Document reproduces the applicable tax period and the same.
The three primary goals of the OECD Guidelines are as follows:
- To transfer price documentation.
- Countries use a three-tiered standard system.
- Country-by-Country Reporting (CbCR) is one of them.
The Scope of Country-by-Country Reporting:
The framework for Country-by-Country Reporting (CbCR) is provided with the advice given by the Organization for Economic Co-operation and Development (OECD). The Resolution has the information regarding notification and filing requirements for corporate entities that are UAE tax residents to be following the CbC.
Eligibility for Reporting by Country:
The scope includes companies that are members of a multinational group of enterprises (MNE) with consolidated revenues of at least 3.15 AED billion in the fiscal year prior to the financial reporting year and who are tax residents of the United Arab Emirates. If the MNE’s Ultimate Parent Company (UPE) is based in the United Arab Emirates, or if the MNE has a UAE-resident CE (Constituent Entity) that is neither a UPE nor an APE, and the MNE group has a UPE outside of the United Arab Emirates as an Alternate Parent Entity (APE) or Surrogate Parent Company (SPE) assigned to it.
Conditions for Submission:
The CbC report must be turned in within a year of the conclusion of the reporting period, according to Article 4 of the Resolution. For instance, the CbC report needs to be turned in by December 31, 2024, for the fiscal year that begins on January 1, 2023.
The deadline for submitting CbCR notifications is the last day of the MNE’s fiscal reporting year:
Accordingly, the CbCR notification needs to be sent to the UAE by December 31, 2019, for an MNE group whose financial year starts on January 1, 2019.
Format for Registration:
A report on the MNE group that includes both qualitative and quantitative data. Three tables should contain the following information: revenue, profit, number of employees, business description, etc.
The CBCR Templates Table 1 The information that is pertinent to physical assets, including share capital, profit/loss before income tax accrued, tax jurisdiction, income tax accrued and paid, and income of linked and unrelated parties, should be considered. Money and its equivalents in cash.
A list of all the MNE group’s constituent entities that are included in each accumulation in each tax jurisdiction must be reported, according to Table 2 of the template. This table provides details on all the institutions and members of a jurisdiction.
Table Three This Table contains any additional information that is necessary to make Tables I and II easier to understand, such as the exchange rate assumptions and data source. Additional assistance on completing the Waiting for Filing CBCR report in the UAE can be obtained from the Ministry of Finance, United Arab Emirates.
Data on permanent establishments must be recorded for the relevant tax jurisdiction in which they are located, according to the CbCR template. The procedures also mandate that the information be declared regularly and that the reporting template encompasses the MNE group’s financial year. The reporting MNE is required to fill out the template using the same data sources every year and to include a brief description of the data sources utilized in the template’s supplemental information section. In the Additional Information section, it should be made clear if the data source has changed.
Keep updated with the recent documentation:
For a period of five years following the submission of the CbC report to the appropriate authorities, keep accurate records electronically in a manner that is compatible and readable.
Linguistic considerations:
English will be the language of record-keeping. The record must be translated into English upon submission by the appropriate authority if it is maintained in a language other than English.
How can Corporate Tax Consultants help?
Corporate Tax consultants in Dubai are known for their corporate tax advice for different businesses in Dubai. They help you with all the information regarding new tax law in UAE. It is important that you hire corporate tax advisors so you can get latest updates regarding all the new amendments in corporate tax and see how it works. ebs Chartered Accountants are one of the leading firms providing such consultation services. if you are unable to hire consultants you can find proper clear information on uaetaxgpt.ae which is just a click away.
FAQs
What is the meaning of country-by-country reporting?
Country-by-Country Reporting (CbCR) is part of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan 13. In essence, large multinationals must provide an annual return, the CbC report, that breaks down key elements of the financial statements by jurisdiction.
What is the penalty for CbCR in UAE?
An administrative fine of up to AED 1,000,000 will be given to those who failed to file the CbCR on time (plus AED 10,000 for each day of failure to submit. The fine could be up to AED 250,000.)
When was CbCR introduced in UAE?
On 30 April 2019, the Cabinet Resolution No. 32 of 2019 (the “Resolution”) on Country-by-Country Reporting (“CbCR”) was issued in the United Arab Emirates (“UAE”). The Resolution was recently published in the UAE Ministry of Finance’s Official Gazette.
