United Arab Emirates
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Executive Summary
On 04 June 2020 amendments were introduced to Resolution 32 of 2019 by the Cabinet of Ministers by way of Cabinet of Ministers Resolution No. 44 of 2020 which overrides Resolution 32 of 2019.
Under Cabinet Resolution 44 of 2020, the reporting entity definition has been amended to specify that the ultimate parent entity (UPE) of a multinational group, tax resident in the UAE, is the only entity of the multinational group required to comply with CbC reporting obligations
Detailed Discussion
Background
The United Arab Emirates (UAE) is a member of the Organisation for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Country by Country (CbC) Reporting is part of Action 13 of the Base Erosion and Profit Shifting (BEPS) initiative led by the Organization for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) industrialized nations.
BEPS Action 13 requires large Multinational Groups of Entities (MNEs) to file a CbC Report that should provide a breakdown of the Multinational Group’s global revenue, profit before tax, income tax accrued and some other indicators of economic activities for each jurisdiction in which the MNE operates.
In the UAE, CbCR requirements are applicable to the UAE-headquartered MNE Groups with ‘financial reporting years’ starting on or after January 1st 2019. Accordingly, for the financial reporting year starting on January 1st 2019, the CbC report must be submitted latest by December 31st 2020.
The MNE Group as per the cabinet resolution includes below,
- 1.
- Two or more companies the tax residence of which is located in different jurisdictions, or including one single company having its tax residence in one country and being subject to tax with respect to the activity it carries out through a permanent entity located in another country;
- 2.
- Which has a total consolidated group revenue that is equal to or more than AED 3.15 billion ((approximately United States Dollars (USD) 857 million)) during the Fiscal Year immediately preceding the Reporting Fiscal Year as indicated in its Consolidated Financial Statements for that preceding Fiscal Year.
The Regulations apply to financial years commencing on or from 1 January 2019. This suggest that any impact due to these changes needs to be attended by the concerned to whom these regulations apply.
The UAE Ministry of finance has updated the information on its dedicated country by country reporting website page (link here).
Major changes in the amended ES Regulations
Reporting Entity
Under the resolutions definition of reporting entity has been amended to state that the Ultimate Parent Entity of the MNE Group whose tax residence is located in the State, is required to submit the report. Article 2(1) state that Each Ultimate Parent Entity of the MNE Group whose tax residence is located in the State shall notify the Competent Authority that it is the Reporting Entity, no later than the last day of the Group’s Reporting Fiscal Year.
This imply that only ultimate parent entity (UPE) of an MNE group that is tax resident in the UAE, is the only entity of the MNE group required to comply with CbC reporting obligations.
Reporting Requirements
- ●
- CbC notification: Each Ultimate Parent Entity of the MNE Group whose tax residence is located in the State shall notify the Competent Authority that it is the Reporting Entity and responsible for filing the CbC report
The earlier resolution included a wider report wherein even the constituent entities, resident in the state, were required to comply with the notification.
So as per the amended resolution, only the Ultimate Parent Company, resident in UAE, is required to file the notification.
- ●
- CbC report: Each reporting entity (Ultimate Parent Company) of an MNE group, tax resident in the UAE, is required to file the CbC report in the UAE within twelve (12) months following the last day of the reporting fiscal year of the MNE group.
All provisions in respect of the surrogate parent entity have been removed under Resolution 44 of 2020.
Points that have stayed same as per previous resolutions?
Other major provisions such threshold, penalties, timelines and information required under CbC reporting are similar to previous resolution.
Article prepared by: Partner Tax Advisory – 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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