Country-by-Country Reporting
Country-by-country reporting (CbCR) is a requirement established by the Organization for Economic Cooperation and Development (OECD) under Action 13 of the Base Erosion and Profit Shifting (BEPS) initiative. This regulation was initially implemented in the United Arab Emirates in 2019 through Cabinet Resolution No. 32 of 2019, which has now been replaced by Cabinet Resolution No. 44 of 2020 and will remain in effect.
According to the Country-by-Country Reporting in UAE (CbCR) regulation, large Multinational Groups of Enterprises (MNEs) operating in the UAE are obligated to submit a CBC report to the competent authorities at the conclusion of each financial year.
This report must include comprehensive information regarding the MNE Group's revenue, profit/loss before taxes, accrued income tax, paid income tax, and the tax residence of each constituent company within the MNE Group where activities are conducted.
Two conditions where MNE has to comply with CbCR
- If the consolidated global revenue of the multinational enterprise (MNE) is equal to or exceeds 3.15 billion in the previous fiscal year.
- If the Entity assumes the role of the Ultimate Parent Company within the Multinational Enterprise Group operating in the United Arab Emirates
CBCR Notification in UAE
The applicability of the Country-by-Country Reporting (CbCR) Notification requires that every Ultimate Parent Entity of the Multinational Enterprise (MNE) Group, whose tax residence is in the United Arab Emirates (UAE), must formally notify the competent authority of its status as the reporting entity. This notification should be submitted no later than the last day of the Group's Reporting Fiscal Year.
Example:
ABC Company has a financial year of 1st January 2022 to 31st December 2022.
The last date for CbCR notification submission will be 31st December 2022.
Fines and Penalty
In the event that the Ultimate Parent Entity fails to submit the CbCR notification by the specified deadline, an administrative penalty of AED 1,000,000 will be imposed. Furthermore, an additional administrative penalty of AED 10,000 per day will be levied for each day that the failure persists, with a maximum penalty of AED 250,000.
If a multinational enterprise (MNE) fails to retain the necessary documents and information as stipulated in this resolution for a period of at least five years following the date of reporting to the competent authority, an administrative penalty of AED 100,000 will be enforced.
Failure to furnish the requisite information to the competent authority will result in an administrative penalty of AED 100,000. Additionally, a reporting entity will be subject to an administrative penalty ranging from a minimum of AED 50,000 to a maximum of AED 500,000 in the event of providing inaccurate or incomplete information.
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Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.