CBCR

Country-by-Country Reporting (CbCR) is a requirement established by the Organization for Economic Co-operation and Development (OECD) under Action 13 of its Base Erosion and Profit Shifting (BEPS) framework. This requirement was first introduced in the United Arab Emirates (UAE) effective from 2019 through Cabinet Resolution No. 32 of 2019. It has since been replaced by Cabinet Resolution No. 44 of 2020, which is currently in effect.

Under the Country-by-Country Reporting (CbCR) regulations in the UAE, large Multinational Enterprise (MNE) Groups are required to submit a CbC report to the Competent Authority at the end of each financial year. This report must include key financial and tax-related information for each constituent entity within the MNE Group, in every jurisdiction where the group operates. The required details include revenue, profit or loss before tax, income tax accrued, income tax paid, and the tax residence of each constituent entity, among other relevant data.

Is Country-by-Country Reporting (CbCR) Applicable to You?

According to Cabinet Resolution No. 44 of 2020, the Country-by-Country Reporting (CbCR) requirements in the UAE apply if both of the following conditions are met:

1. Your entity is the Ultimate Parent Company of the Multinational Enterprise (MNE) Group in the UAE; and

2. The consolidated revenue of the MNE Group is equal to or exceeds AED 3.15 billion in the preceding financial year.

Is There a Deadline to Comply with the Country-by-Country Reporting (CbCR) Regulation in the UAE?

Yes. UAE entities that fall under the scope of the CbCR regulation must comply with both Notification and Reporting requirements within the specified deadlines:

1. CbCR Notification

Entities must submit a CbCR Notification to the Competent Authority no later than the last day of the financial year. This notification must indicate:

1. Whether the entity is the Ultimate Parent Entity, Surrogate Parent Entity, or otherwise;

2. The identity and tax residence of the reporting entity (if different).

2. CbCR Report

The CbCR Report must be submitted within 12 months from the end of the relevant financial year. This report must include comprehensive financial and tax information for each constituent entity within the MNE Group.

Applicability of CbCR Notification

Every Ultimate Parent Entity of a Multinational Enterprise (MNE) Group that is tax resident in the UAE is required to notify the Competent Authority that it will act as the Reporting Entity. This notification must be submitted no later than the last day of the Group’s financial reporting year.

Examples:

• If the MNE Group’s financial year is from 1st January 2019 to 31st December 2019, the notification must be submitted by 31st December 2019.

• If the financial year runs from 1st April 2019 to 31st March 2020, the notification deadline is 31st March 2020.

Penalties for Non-Compliance

Failure to submit the CbCR notification by the specified deadline may result in the following administrative penalties:

• A fixed penalty of AED 1,000,000 for failure to submit the notification on time; and

• An additional AED 10,000 per day for each day the non-compliance continues, up to a maximum of AED 250,000.

Applicability of Country-by-Country (CbC) Reporting

CbC Reporting is mandatory for every Reporting Entity in the UAE that falls within the scope of the regulation for the current financial year. The Reporting Entity must submit the CbC Report to the UAE Ministry of Finance (MoF) within 12 months from the end of the relevant financial year.

Examples:

• For an MNE Group with a financial year from 1st January 2019 to 31st December 2019, the CbC Report must be submitted by 31st December 2020.

• For a financial year running from 1st April 2019 to 31st March 2020, the submission deadline is 31st March 2021.

Contents of the CbC Report

The CbC Report must include the following:

• Aggregate data for each jurisdiction where the MNE Group operates, covering:

  1. Revenue

  2. Profit or loss before income tax

  3. Income tax paid

  4. Income tax accrued

  5. Stated capital

  6. Accumulated earnings

  7. Number of employees

  8. Tangible assets (excluding cash and cash equivalents)

• Details of each Constituent Entity of the MNE Group, including:

  1. Tax residence

  2. Jurisdiction of incorporation (if different from the tax residence)

  3. Description of the main business activity or activities

Penalties for Non-Compliance

Failure to submit the CbC Report within the prescribed deadline will result in:

1. A fixed administrative penalty of AED 1,000,000, and

2. An additional penalty of AED 10,000 per day for continued non-compliance, up to a maximum of AED 250,000.

Other Penalties under CbCR Regulations

In addition to the penalties for late submission, the following administrative penalties may apply for non-compliance with documentation and information requirements:

1. Failure to Maintain Records:
   If the Reporting Entity fails to retain the required documents and information for at least five (5) years from the date of submitting the CbC Report to the Competent Authority, an administrative penalty of AED 100,000 will be imposed.

2. Failure to Provide Information:
   If the Reporting Entity does not provide the requested information to the Competent Authority, a penalty of AED 100,000 will be charged.

3. Submission of Inaccurate or Incomplete Information:
   If the Reporting Entity submits inaccurate or incomplete information, an administrative penalty ranging from AED 50,000 to AED 500,000 may be imposed, depending on the severity of the non-compliance.