Overview of CbCR in the UAE
The Organization for Economic Co-operation and Development (OECD) has established a standardized three-tier documentation framework, which includes the Master File, Local File, and Country-by-Country Reporting (CbCR), to enhance transparency in transfer pricing. Country-by-Country Reporting (CbCR) is a key component of Action 13 under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, designed to enhance tax transparency and curb tax avoidance. It requires large Multinational Enterprise (MNE) Groups to submit a detailed report outlining their global revenue, profit before tax, income tax accrued, and other economic indicators across all jurisdictions in which they operate.
In the UAE, CbCR regulations were initially introduced through Cabinet Resolution No. 32 of 2019 and later replaced by Cabinet Resolution No. 44 of 2020, which remains in effect. These regulations apply to UAE-headquartered MNE Groups with financial reporting years starting on or after January 1, 2019. Under these requirements, MNEs must submit their CbC report to the Ministry of Finance (MoF) by the end of each financial year, ensuring alignment between economic value generation, profit allocation, and tax payments on a global scale.
Who Needs to Comply?
CbCR obligations apply if “both” of the following conditions are met:
- The entity is the Ultimate Parent Entity (UPE) of an MNE group headquartered in the UAE.
- The consolidated group revenue of the MNE is equal to or exceeds AED 3.15 billion during the Fiscal Year. immediately preceding the reporting Fiscal Year.
Key Compliance Deadlines
UAE entities subject to CbCR must fulfill two primary obligations:
- CbCR Notification:
- The CbCR notification needs to be submitted no later than the last day of the Fiscal Year and it informs the FTA that the Ultimate Parent Entity is the reporting entity that will file the CbCR.
Example:
- For an MNE with a financial year ending on December 31, 2024, the notification deadline is December 31, 2024.
- For an MNE with a financial year ending on March 31, 2024, the notification deadline is March 31, 2024.
- CbC Report Submission:
- The Ultimate Parent Entity is also required to file the CbCR no later than 12 months after the last day of each reporting year of the MNE Group in the UAE.
Example:
- If the financial year ends on December 31, 2024, the report is due by December 31, 2025.
- If the financial year ends on March 31, 2024, the report is due by March 31, 2025.
If your entity is also impacted by transfer pricing rules, it is crucial to understand the UAE transfer pricing disclosure form requirements as well.
Penalties for Non-Compliance
Failure to comply with CbCR obligations can result in significant penalties:
- Failure to submit a CbCR notification within the due date: AED 1,000,000, plus AED 10,000 per day for continuing failure (up to AED 250,000).
- Failure to submit a CbC report by the due date: AED 1,000,000, plus AED 10,000 per day for continuing failure (up to AED 250,000).
- Failure to maintain required documentation for five years: AED 100,000.
- Failure to provide information to the authorities: AED 100,000.
- Providing inaccurate or incomplete information: AED 50,000 to AED 500,000.
Exception: The total penalties imposed on the Reporting Entity or on the Ultimate Parent Entity (as the case may be) in accordance with the provisions of this Resolution for any Reporting Fiscal Year, may not exceed, the amount of UAE Dirhams One Million (AED 1,000,000), with the exception of the additional penalties applicable in cases of continuing failure
You may also want to review the penalties under UAE corporate tax law that can apply alongside CbCR non-compliance.
What Information is Included in the CbC Report?
As per Cabinet Resolution No. 44 of 2020, the form of a CbCR follows the Standard Template attached in Annex (3) to Chapter (V) of the OECD Transfer Pricing Guidelines. Specifically, a CbCR includes the following three tables:
- Table 1—Contains the quantitative information per tax jurisdiction, such as unrelated party and related party revenues, stated capital, taxes accrued and paid, employee count, etc.
- Table 2—Contains the qualitative information per Constituent Company on the main business activities undertaken during the year.
- Table 3—Contains additional information necessary to facilitate the understanding of Tables 1 and 2 (for example, assumptions on exchange rates, source of data, etc.)
For a broader understanding of how CbCR fits into the UAE’s corporate tax landscape, refer to our UAE corporate tax guide for citizens.
Conclusion
In summary, compliance with UAE’s Country-by-Country Reporting (CbCR) regulations is crucial for multinational enterprise (MNE) groups meeting the specified thresholds. Timely submission of notifications and reports is essential to avoid substantial penalties. As regulatory requirements evolve, businesses must stay informed and ensure accurate reporting to maintain transparency and compliance. Seeking professional guidance can help navigate complexities and streamline the compliance process.
How BCL Globiz Can Assist?
At BCL Globiz, we provide end-to-end support for CbCR compliance, including:
- Assessing whether an entity is subject to CbCR regulations.
- Assisting with notification filings and CbC report preparation.
- Ensuring compliance with UAE regulatory requirements and avoiding penalties.
Expert Assistance for Transfer Pricing Compliance in Dubai
BCL Globiz is a trusted consultancy firm specializing in transfer pricing, international tax, and corporate compliance services. With in-depth expertise in UAE tax regulations and OECD guidelines, BCL Globiz assists businesses in preparing comprehensive transfer pricing documentation, including Country-by-Country Reporting, Master Files, and Local Files. Their team ensures that multinational enterprises remain compliant with evolving tax laws while optimizing their global tax structures.
Businesses seeking guidance on transfer pricing documentation and compliance in Dubai can benefit from the expertise of consultants like BCL Globiz, who provide tailored advisory services.
For further assistance, reach out to our expert rakesh@bclglobiz.com and check out our website www.bcl.ae
Looking for expert help in managing your corporate tax responsibilities? Explore our UAE corporate tax assistance services.
