As per recent media reports, UAE has introduced country-by-country reporting requirements.

These rules are in line with the guidance issued by Organization for Economic Cooperation and Development (“OECD”) on CbC reporting. The BEPS Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.

What is CbC Reporting?

Large Multi-National Enterprises (MNEs) will have to provide an annual report that breaks down key elements of the financial and tax information relating to the global allocation of their income and taxes, among other indicators of economic activity, by each jurisdiction that they operate in.

CbC in UAE

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• CbC reports will be required for the entities that are “tax residents” in the UAE and also part of a multinational enterprise (MNE) having consolidated revenues equal to or exceeding AED 3.15 billion in the preceding financial year.

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• It is applicable to groups that have subsidiaries in at least two tax jurisdictions.

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• UAE-based entity of an MNE need to notify UAE Ministry of Finance if it is an ultimate parent entity (UPE) or will act as a surrogate parent entity (SPE) appointed to file the CbC report on behalf of the MNE, or the identity and tax jurisdiction of the enterprise that would submit the CbC report, before the end of the financial reporting year of the MNE.

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• Cbc report content is expected to include financial information relating to revenues, profits/losses before income tax, income tax paid, income tax accrued, capital, accumulated earnings, number of employees, and tangible assets other than non-cash or cash-equivalent assets, along with details about business activities conducted and other disclosures and explanations provided by the MNE, with respect to each jurisdiction in which the MNE operates.

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• Failure to comply with the CbC rules may result in the imposition of penalties.

Action plan for MNEs

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• UAE-based MNEs that are within the scope of the CbC reporting will need to understand and assess their ability to collect data and resulting information that it provides to the authorities

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• UAE-headquartered MNEs that have previously filed a CbC report in a “surrogate parent entity” jurisdiction will need to reevaluate their practices

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• UAE entities of a qualifying MNE group would need to provide notification to the authority regarding the identify and jurisdiction of the group company filing the CbC report

Prepared by: CA NAIM ABBAS VIRANI, Assistant Manager, Premier Brains

This document is only for information purposes and should not be construed as an advice. It does not necessarily cover each aspect of the topic with which it deals. You should not act upon the contents of this document without receiving formal advice on your particular circumstances.

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