Country by Country Reporting
Country by Country (CbC) Reporting is part of Action 13 of the Base Erosion and Profit Shifting (BEPS) initiative led by the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) industrialised 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.
The purpose of CbC Reporting is to eliminate any gap in information between the taxpayers and tax administrations with regard to information on where the economic value is generated within the MNE Group and whether it matches where profits are allocated and taxes are paid on a global level.
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 by December 31st 2020 at the latest.
Decision of the Council Resolution No. 44 of 2020 regulating the reports submitted by multinational companies
Webinar on CbCR conducted on 2 November 2020
Guidance on preparation and submission of filings
CBCR Notification and Reporting Portal
FAQ
A. General CbC reporting considerations
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. The purpose of CbC Reporting is to eliminate any gap in information between the taxpayers and tax administrations with regards to information on where the economic value is generated within the MNE Group and whether it matches where profits are allocated and taxes are paid on a global level.
The UAE legislation governing CbC Reporting is covered by the UAE’s Cabinet Resolution no. 44 of 2020, which replaces the existing Cabinet Resolution no. 32 of 2019.
The OECD guidance on the implementation of CbC Reporting can be used to interpret the UAE CbC Reporting legislation to ensure a consistent and standard approach to CbC Reporting across all implementing countries. It should be noted that there are some differences between the OECD Model legislation and the UAE CbC Reporting Legislation. Where there is a conflict, the UAE CbC Reporting legislation takes precedence.
A number of terms used in these FAQs are defined in the UAE CbC Reporting Legislation, including, e.g. “country-by-country report”. Whilst these FAQs provide further information to assist with the interpretation of some of these terms, the reader is referred to the UAE CbC Reporting Legislation for a full definition of all relevant terms.
The UAE Ministry of Finance (the Competent Authority, abbreviated as MoF) will ensure the confidentiality of the information contained in CbC Reports provided to it, in accordance with the provisions of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCAA) developed by the OECD and the Council of Europe.
The BEPS Action 13 Report sets out three permitted uses for information contained in CbC Reports, namely:
- To assess high-level transfer pricing risk
- To assess other BEPS-related risks; and
- For economic and statistical analysis
The UAE is committed to using information provided in CbC Reports in accordance with the permitted uses above. The MoF will not use CbC Reporting data beyond such limitations.
The effective records should be kept by a CbC Reporting Entity for 5 years following the date on which the CbC Report is submitted to the MoF. The aforementioned records may be kept electronically, provided that the records are retained in a readable electronic format and in accordance with UAE laws and regulations relating to the retention of electronic records.
B. CbC report filing
A report including quantitative and qualitative information about the MNE Group. Information such as revenues, profits, employees count, business description, etc. should be reported under three tables:
- Table I – This contains the quantitative information per tax jurisdiction such as third party and related party revenues, stated capital, taxes accrued and paid, employee count, etc.
- Table II – This contains the qualitative information per constituent entity on the main business activities undertaken during the year.
- Table III – This contains any additional information necessary to facilitate the understanding of Tables I and II (e.g. assumptions on exchange rates, source of data, etc.)
UAE-headquartered Groups of companies which meet the following criteria should comply with CbC Reporting legislation in the UAE:
- MNE Groups i.e. Groups which consist of two or more enterprises that are residents for tax purposes in different jurisdictions (an enterprise that is resident for tax purposes in one jurisdiction and has a taxable permanent establishment in another jurisdiction should be considered as a separate enterprise in the context of this definition); and
- Have a total consolidated revenue that is equal to or more than AED 3,150,000,000 for the financial year preceding the reporting year concerned.
ILLUSTRATION For the MNE Group’s CbCR threshold assessment for the reporting year ending by December 31st, 2019 (Y) a check should be done on the MNE Groups’ consolidated revenues for the financial year ended per December 31st 2018 (Y-1)
- Case 1: an MNE Group had a consolidated revenue of AED 3,500,000,000 during the financial year ending December 31st, 2018. In this case, for the CbCR reporting year 2019, the MNE Group meets the CbCR revenue threshold and will need to comply with CbC Reporting legislation in the UAE for the reporting year 2019.
- Case 2: an MNE Group had a consolidated revenue of AED 3,000,000,000 during the financial year ending December 31st, 2018. In this case, for the CbCR reporting year 2019, the MNE Group does not meet the CbCR revenue threshold and does not need to comply with CbC Reporting legislation in the UAE for the reporting year 2019.
CbC Reporting requirements come into effect for financial years starting on or after January 1st 2019.
The CbC report should be filed within 12 months from the end of the reporting year of the MNE Group. E.g. With respect to the financial year commencing on January 1st 2019 and ending by December 31st 2019, the CbC Report should be filed no later than December 31, 2020.
The UAE tax resident entity, which is an Ultimate Parent Entity of the MNE Group subject to the CbC Reporting Legislation as clarified under question 9 above.
Based on the existing UAE laws and international tax treaties, an entity should be considered as a tax resident in the UAE if it is incorporated or created under the laws of UAE or has its place of effective management therein.
The entity filing the CbC Report should consistently use the same sources of data from year to year in completing the CbC Report. The data can be obtained from the following sources:
- Consolidation reporting packages; or
- Separate entity statutory financial statements; or
- Regulatory financial statements; or
- Internal management accounts.
The entity preparing the CbC Report should provide a brief description of the sources of data used and explain reasons for any changes in sources of information from year to year in the Additional Information section (Table III) of the CbC Report.
Please see the links above
Please see the links above
If separate entity statutory financial statements are used as the basis for reporting, all amounts should be translated to the stated functional currency of the MNE Group. The average exchange rates for the year should be used for currency conversion. The applied rates should be stated in the Additional Information section (Table III) of the CbC Report.
The CbC Report should be submitted in English.
Permanent establishment data should be reported by reference to the tax jurisdiction in which the permanent establishment is situated and not by reference to the tax jurisdiction of residence of the entity of which it is a permanent establishment. Information reported by reference to the residence tax jurisdiction of the entity of which it is a permanent establishment should exclude financial data related to the permanent establishment.
Example: The UAE entity has a branch in the UK, The CbC Report should reflect revenue, profit and other indicators of the branch as related to the UK. Data for the UAE entity should be presented after exclusion of information related to the UK branch.
C. CbCR notifications
A form containing (i) confirmation that the notifying entity is the Ultimate Parent Entity of the MNE Group, resident in the UAE, and the UAE CbCR requirements are applicable to such MNE Group; and (ii) identification of such entity including trade license number, address, business activity and year end.
The UAE tax resident Ultimate Parent Entity of the MNE Group to which CbCR legislation is applicable (refer FAQ 9 above for thresholds and applicability of UAE CbCR legislation).
CbCR notifications must be submitted no later than the last day of the financial reporting year of the MNE. Accordingly, for the MNE Group’s financial year starting on January 1st 2019, CbCR notification should be submitted in the UAE by no later than December 31st 2019.
Please see the links above
The content provided on this webpage does not constitute legal or tax advice in respect of the matters set out herein. For advice on tax and legal matters, please consult a professional tax or legal advisor.