FAQs

CbCR means Country-by-Country Reporting. It is a part of Action 13 of the Base Erosion and Profit Sharing (BEPS) initiative controlled by the Organization for Economic Cooperation and Development (OECD) and the Group of Twenty (G20) industrialized nations.

Under Action 13, all large MNEs are mandated to prepare a country-by-country report. This report will contain all information and data on the global allocation of the economic activity and related numbers in all the tax jurisdictions where it has operations. These numbers include revenues, profits, tax amounts, taxes paid, and other relevant information.

The main aim of preparing this report is to share it with the relevant tax authorities in all the jurisdictions where the MNEs operate. These reports are used in BEPS risk assessments and examination of transfer pricing.

Thus, these reports provide information on the source of economic value in the MNE Group. These are matched with the information on the locations where the profits are allocated and taxes are paid. These reports help to remove any gaps between the information shared by taxpayers with what the tax administrations are knowing.

Action Plan 13 of the BEPS initiative expects country-by-country reporting and transfer pricing documentation from MNEs. This is to reduce the effects of tax avoidance by asking MNEs to submit annual reports for each jurisdiction in which they operate.

As per these rules, MNEs are required to submit the following documents:

• A master file
• A local file
• A country-by-country report

The Ministry of Finance in the UAE issued Resolution No. 44 of 2020 that replaced the Resolution No. 32 of 2019. According to this resolution, if the ultimate parent entity (UPE) of a multinational entity (MNE) is a tax resident in UAE, only then the entity is required to meet the CbCR requirements of UAE.

The key provisions of this Resolution include:

• The UPE which is a tax resident in UAE must notify the Ministry of Finance (competent authority of UAE) about its eligibility for filing the CbC report before the last day of the Group’s reporting fiscal year.
• The UPE must submit the CbC report within 12 months and before the last day of the reporting fiscal year of the MNE group. If the financial year starts on January 1, 2020, and ends on December 31, 2020, the company must file the CbC report no later than December 31, 2021.

The CbCR report contains the following information:

• The identity of each constituent company of the MNE Group in terms of name, main business activity or activities, the jurisdiction of registration and establishment, and the jurisdiction of tax residence in Table 2.
• Aggregated information related to the following for every country in which the MNE Group has its operations in Table 1:
  • Revenues
  • Profits/losses before tax
  • Income tax paid
  • Income tax accrued
  • Number of employees
  • Accumulated earnings
  • Stated capital
  • Cash equivalent tangible assets
• Any other additional information that adds to the information provided in Tables 1 and 2 such as data sources, reasons for changes in data sources if any, exchange rates, etc.

Multinational Groups of companies with headquarters in UAE and meeting the following criteria are required to comply with the CbCR legislation in UAE:

• MNE Groups that comprise two or more companies with tax residence in different jurisdictions or one company with tax residence in one country and with a taxable permanent establishment in another country and
• MNE Groups with total consolidated group revenue of not less than AED3.15 billion for the financial year that precedes the reporting fiscal year.

The entities must fill in the details in CbC reports using the same data sources every year. They must mention these data sources in Table 3 of the report. If there are any changes in the data sources used, then the reasons for changes must also be mentioned. The following sources are used for providing information in CbC reports:

• Statutory financial statements of separate entities
• Regulatory financial statements
• Consolidation reports
• Internal management accounts

The key objectives behind the CbCR report submission are:

• To analyze the transfer pricing risks
• To assess any other risks related to BEPS
• To check if the constituent companies of the MNE Group comply with the relevant transfer pricing rules
• To examine the company’s numbers for economic value generated

Yes. The Ministry of Finance requires the companies:

• To maintain these reports for five years after the date of its submission to the authority
• To submit the reports to MoF in English
• To submit these reports electronically using the technology provided by the MoF
• To submit the reports in one currency, the stated functional currency of the Group. If different currencies are used in the sources, these must be converted to the Group’s functional currency at the average exchange rate for the year, which must be mentioned in Table 3 of the CbC report.

The Ministry of Finance guarantees that all the information provided to it in the CbC reports will be kept confidential as per the provisions laid by the OECD and the Council of Europe in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCAA).

The UAE tax resident, Ultimate Parent Entity of the MNE Group is required to comply with the CbCR notification provisions. It must submit the form no later than the last day of the financial reporting year of the Group that contains information on:

• Confirmation that it is the UPE of the MNE Group that is a tax resident of UAE, and it is required to comply with the CbC reporting obligations.
• Identity documents that include the trade license number, name of the entity, business activity, physical address, and financial year-end.

Companies must submit their CbC reports and CbCR notifications on the CbCR portal (the link is https://cbcrportal.mof.gov.ae/). They can login to this link after enrolling on the UAE CbCR portal. After enrollment, the authorized user of the UPE of the MNE Group receives the login details on email. First, they must submit the CbCR notifications and then the CbC reports.