Country by Country Reporting (CbCR)

How and why CbCR was adopted in UAE?

 

CbCR is a part of Action 13 of the Base Erosion and Profit Shifting (BEPS) project that is led by the G20 and the Organisation for Economic Co-operation and Development (OECD).

The BEPS initiative is aimed at preventing tax planning that exploits gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. In other words, the focus of BEPS regulations is to ensure alignment of profit allocation (remuneration) with value creation (functions performed, risks assumed and assets owned) for each entity across the value chain.

 

Actions taken by the UAE regarding CbCR

The UAE joined the BEPS Inclusive Framework (BEPS IF) on 16 May 2018 and has committed to implementing the four BEPS minimum standards, including ESR and CbCR. The UAE has issued a CbCR legislation on April 2019 under the Cabinet Resolution no 32 of 2019.The UAE has signed and ratified the multilateral competent authority agreement (MCAA) on the exchange of CbC reports, but has signed 49 agreements for the automatic exchange of CbC reports, effective for periods beginning January 1, 2019.
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Applicability of CbCR:

Multinational groups with consolidated revenues of at least AED 3.15 billion (approximately USD 855 million) per annum and wherein an Ultimate Parent Entity established in the UAE being tax resident (being the parent company of a Multinational Group) or a Constituent Entity, through ownership or control of a Multinational Group in UAE.

Compliance Requirements:
Notification must be submitted, on or before thefinancial reporting year of the Multinational group starting on 1st January 2019, the due date of first notification must be on or before 31 December 2019of the group’s financial year by the Constituent Entity of an MNE Group being Tax Resident of UAE.

NOTE:Report filing must be done within 12 months from the end of group financial year by the Parent Company being Tax Resident in UAE or the Constituent Entity (being tax resident) on fulfilling certain conditions.

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Penalties for Non- compliance:

There are four types of administrative penalties ranging from AED 50,000 to AED 1,000,000 (1 million). Additional penalty of AED 10,000 per day maximum up to AED 250,000 for delay in filing.

Potential impact of introducing CbCR regulations in the UAE

Key Benefits

  • Reporting CbCR information to the UAE MoF(rather than to foreign tax authorities), thereby preserving confidentiality on such (potentially sensitive) information to be within the UAE only
    • Extensive network of UAE exchange of information framework(49 agreements) will ensure minimum secondary filing requirements in other jurisdictions
    • Groups to get an birds-eye view of operations through CbCR information, where risks can be identified and where Groups can take proactive steps to mitigate such risks

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Key challenges

  • Additional administrative and compliance burden, particularly for those UAE headquartered businesses that are not already subject to CbCR requirements elsewhere
  • Increased oversight from international bodies on how UAE headquartered groups conduct their businesses

How Spectrum can help you?

Spectrum offers end-to-end accounting and audit services, simplifying its client’s life by adopting the best practices to provide its clients with complete solutions. We help you with the assessment of applicability of Country by Country Reporting (CbCR), help you withthe notification compliances and in aggregating the data required under the CbC reporting. To sum up in one word, Spectrum offers the best CbCR advisory service for your company.

Apart from advising on the very important Country by Country Reporting (CbCR) standards, we also specialize in a spectrum of services which includes Accounting, Auditing, Economic Substance Regulations (ESR), Mergers and Acquisitions (M&A), Company Formation and Liquidation and various Business Advisory Services. Our magnitude of experience, competence and reputation makes us a distinctive world-class accounting service provider.

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