On 13th April,2019 the cabinet resolution no. 32 of 2019 was issued introducing the regulations on Country by Country Reporting (CbCR) in the United Arab Emirates.
Purpose of Base Erosion & Profit Shifting (BEPS) & Country by Country Reporting
Country by Country Reporting (CbCR) is a part of the Base Erosion and Profit Shifting that is led by the Group of Twenty (G20) industrialized national and Organization of Economic Co-operation Development (OECD).
BEPS action 13 requires large Multinational Group Entities (MNEs) to file a CbC Reporting that should provide breakdown of Multinational Group’s
- Global Revenue
- Profit Before tax
- Income Tax Accrued and
- Some other indicator of economic activities for each jurisdiction in which the MNE operates
The purpose of Country to Country Reporting (CbCR) is to eliminate
- Any gap information between taxpayer and tax administration
- With regards to information on where the economic value is generated within the MNEs group
- And whether it matches where profits are allocated & taxes on a global level
Applicability: Regulation applies to Multinational Group Entities under Country to Country Reporting
Country to Country Reporting regulation will be applicable for those groups of companies that meet following conditions:
- if the entity of the MNE is a tax resident in the UAE and are part of a Multinational Enterprises (“MNE”) Group and
- with consolidated revenues of at least AED 3.15 billion (approx. USD 857 million) in the financial year immediately preceding the reporting period, based on the consolidated financial statements of that preceding year (i.e., FY18)
Country by Country (CbC) Notification Requirements
CbCR notification must be filed to the Authority before the end of the current financial year.
Example: CbcR notification for the Financial Year 2019 (1st Jan to Dec 19), should be submit before 31st December 2019.
Country by Country (CbC) Reporting Requirements
CbC Reporting comes into effect for the financial years starting on or after January 2019.
CbC Reporting must be filed within 12 months from the end of reporting year of MNE Group.
Example: Country by Country (CbC) Reporting for the financial year 2019 (1st Jan to 31st Dec 2019) should be filed no later than December 31st, 2020.
Penalty for non-compliance: If CbCR Reporting is not submitted within specified time (Due date), AED 100,000 Administration penalty will be applied.
And additional, AED 10,000 per day will be charged (Maximum upto AED 250,000)
Insides: Implication for MNE Groups operation in the United Arab Emirates
- Ultimate Parent Entity (UPE) of MNE group is located in the UAE: If the UPE of a Multinational Group is Tax Resident of UAE, the CbC report should be filed in the UAE accordingly.
- If the Multinational Group submits CbC Report through its UPE in the United States, then there are no requirements for secondary filing of the CbC report in the UAE except separate announcement by MoF in this regard. However, a Cbc notification should still be submitted by the constitute entities that are tax resident in the UAE.
This blog post is written by CA. Taher Bohra. Feel free to call our Tax Advisor today for a quality consultation related to all kind of VAT and accounting related queries. Please send your queries to info[at]flyingcolour[dot]com or call +971 4 4542366.