The United Arab Emirates (UAE) is a significant hub for multinational enterprises (MNEs), and as part of its commitment to international tax transparency, it has adopted the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 regarding Country-by-Country Reporting (CbCR). The UAE’s CbCR regulations are designed to provide transparency on the tax positions of large multinational groups, allowing tax authorities to assess risks related to profit shifting and tax avoidance. This guide outlines the key aspects of the CbCR regime in the UAE, including its applicability, reporting requirements, submission procedures, penalties for non-compliance, and useful resources for CFOs and financial professionals in MNEs.

Applicability of CbCR in the UAE

Criteria for Reporting:

• CbCR obligations apply to multinational enterprise (MNE) groups that meet the following conditions:
  • The MNE group’s consolidated revenues are at least AED 3.15 billion (approximately €750 million) in the preceding fiscal year.
  • The ultimate parent entity (UPE) is a tax resident in the UAE. In such cases, the UPE must file a CbC report with the UAE tax authority.
  • A UAE constituent entity (subsidiary or branch) may also be required to file a CbC report if the UPE is not a UAE resident, and certain conditions apply, such as:
    • The parent entity’s jurisdiction does not have CbCR requirements,
    • The parent entity’s jurisdiction does not have an agreement for the exchange of CbC reports with the UAE, or
    • There is a failure in the automatic exchange of CbC reports between the UAE and the parent entity’s jurisdiction.

Relevant Legislation:

• The CbCR regulations in the UAE were introduced through Ministerial Resolution No. 44 of 2019 on CbCR, in line with the OECD’s BEPS Action 13.
• The regulations are overseen by the Ministry of Finance (MoF), which ensures compliance with reporting obligations and oversees the exchange of information between jurisdictions.

Ad.

Reporting Requirements

Information to be Reported:

• The CbC report must include comprehensive financial and tax-related information for each jurisdiction in which the MNE operates. Key data includes:
  • Consolidated revenue (segregated between related-party and unrelated-party transactions),
  • Profit or loss before income tax,
  • Income tax paid and accrued,
  • Capital and accumulated earnings,
  • Number of employees,
  • Tangible assets other than cash or cash equivalents.
• A list of all constituent entities within the MNE group, along with their respective jurisdictions and main business activities, must also be provided.

Form and Submission:

• The CbC report must be prepared in the OECD XML schema format, which ensures compliance with international standards.
• Reports must be submitted electronically to the UAE Ministry of Finance through the dedicated online portal. For more information on the filing process, visit the Ministry of Finance website.

Filing Deadlines

• The CbC report must be submitted within 12 months after the last day of the reporting fiscal year of the MNE group. For example, if the fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.
• Additionally, UAE entities that are part of an MNE group are required to notify the Ministry of Finance of the identity and jurisdiction of the reporting entity (whether it is the UPE or a surrogate parent entity) by the last day of the reporting fiscal year.

Penalties for Non-Compliance

Penalties:

• The UAE imposes financial penalties for non-compliance with CbCR obligations. Key penalties include:
  • A fine of AED 1,000,000 (approximately €250,000) for failure to submit the CbC report by the deadline.
  • Additional penalties of AED 10,000 to AED 50,000 may be applied for failure to notify the authorities about the reporting entity.
  • Fines may also be imposed for submitting incomplete or inaccurate information in the CbC report.

Defences:

• MNEs may appeal against penalties if they can demonstrate a valid reason for non-compliance, such as unforeseen technical issues. However, the UAE Ministry of Finance encourages businesses to ensure robust internal systems to avoid delays and inaccuracies in reporting.

Confidentiality and Use of Information

Data Protection:

• CbC reports filed in the UAE are subject to strict confidentiality rules and are used only for tax risk assessment purposes.
• The UAE participates in international agreements for the automatic exchange of CbC reports with other tax authorities. Reports are exchanged with jurisdictions that have signed bilateral or multilateral agreements with the UAE, ensuring that information is shared only with tax authorities that meet the OECD’s confidentiality and data protection standards.