UAE marks a beginning of new chapter in Transparency paradigm. If at all a country can raise its financial standards to a top-notch supremacy and globally attractive tax standards just by an introduction of a report, believe me it is nothing other than ‘Country by Country’ reporting.
Below are the capsuled facts on ‘CbCR in UAE’.
- In May 2018, the UAE became a member of the OECD Base Erosion and Profit Shifting (BEPS) Inclusive Framework, committing the UAE to align its domestic tax rules with the shared international consensus on international tax rules, and implementing the BEPS minimum standards.
- One of the minimum standards is CbCR, which is covered in Action 13 of BEPS Standards.
- The objective of a CbC report is for tax authorities to assess high-level risks related to transfer pricing and BEPS for MNE groups.
- A CbC report of an MNE provides jurisdiction-wise amount of revenue, profit before income tax and income tax paid and accrued, number of employees, stated capital, retained earnings and tangible assets. It also requires MNEs to identify each entity within the group doing business in a particular tax jurisdiction and to provide an indication of the business activities that each entity engages in.
- The new requirements will affect all businesses that have a legal entity or branch in the UAE and are members of a multinational enterprise (MNE) group with annual turnover above AED3.15b (in line with the OECD threshold of Euro 750 mn).
- The CbCR rules are effective for fiscal years beginning on or after 1 January 2019.
- MNE groups with operations in the UAE will need to assess if they are subject to CbCR notification and filing requirements under the new rules.
- Reporting Requirements: First reports due on 31 December 2020 and first notifications due on 31 December 2019.
- UAE is already a signatory to the CbC MCAA (since June 2018) and accordingly, would now be able to exchange CbC reports with most of the other countries having CbC legislations.
- The UAE has not yet activated any exchange relationships for CbCR. However, it is expected that these will get activated and become effective in advance of the first CbCR deadline i.e., 12 months after the last day of the fiscal year end.
Let’s welcome the big step! More updates to follow.
Disclaimer: The information provided in the article is for informational purposes only. It should not be construed as, nor relied upon as, legal advice.
Best Regards,
CA. Mohammed Shafeek
Disclaimer: This document has been prepared as a general guide. It is not substitute for professional advice. Neither MSATC nor its partners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document.