Country-by-Country Reporting in the United Arab Emirates 

Country-by-Country Reporting (CbCR) is part of the Base Erosion and Profit Shifting (BEPS) Action Plan 13 of the BEPS Action Plan 15 Package . The United Arab Emirates (UAE) has made significant strides in enhancing tax transparency and international cooperation through the implementation CbCR regulations. The journey of CbCR in the UAE reflects a commitment to aligning with global standards and ensuring robust tax compliance for Multinational Enterprises (MNEs). 

UAE’s CbCR Journey 

2018: Commitment to BEPS Inclusive Framework In 2018, the UAE joined the Base Erosion and Profit Shifting (BEPS) Inclusive Framework. By doing so, the UAE committed to implementing the four BEPS minimum standards, specifically Actions 5, 6, 13, and 14. These actions are designed to address tax avoidance, prevent treaty abuse , , ensuring a transparent tax environment and improving dispute resolution process. 

2019: Introduction of CbCR Regulations the UAE introduced CbCR regulations in 2019, effective from January 1st. This step aimed to enhance international cooperation and increase tax transparency. The regulations mandated that UAE-headquartered MNE groups provide detailed reports on their global income allocation, taxes paid, and economic activity, thereby fostering transparency and accountability. 

2020: Updates to Comply with OECD Standards In 2020, the UAE updated its CbCR regulations to align with the OECD standards. The updated requirements were applicable from January 1, 2019, focusing specifically on UAE-headquartered MNE groups. This update ensured that the UAE’s CbCR framework remained consistent with international best practices and reinforced its commitment to tax transparency. 

The Updated UAE CbCR Legislation 

Applicability The updated CbCR legislation applies to the ultimate parent entities of UAE-headquartered MNE groups. To fall under this regulation, the consolidated group revenue must exceed AED 3.15 billion in the previous financial year. 

Requirements The UAE’s CbCR regulations entail two primary requirements: 

• CbCR Notification: This must be filed before the end of the financial year. 

• CbC Report: This comprehensive report needs to be filed within 12 months from the end of the financial year. 

Consequences for Non-Compliance Non-compliance with the CbCR regulations can result in severe penalties ranging from AED 100,000 to AED 1.25 million. These penalties underscore the importance the UAE places on adherence to its tax reporting requirements. 

Key Legislative Milestones 

Cabinet Resolution No. (32) of 2019 Under this resolution, all UAE resident entities of covered MNE groups (whether headquartered in the UAE or outside) are required to submit the CbCR notification. Non-UAE headquartered MNE groups had the option to assign a UAE-based group entity to file the CbC report on behalf of the group in specific cases, such as the absence of CbCR legislation in the country of headquarters. Additionally, UAE group entities of non-UAE headquartered groups were required to file the CbC report in the UAE if no exchange relationship existed between the UAE and the headquarters jurisdiction. 

Cabinet Resolution No. (44) of 2020 This resolution introduced significant changes to simplify and clarify the reporting obligations. Only the ultimate parent entities of MNE groups headquartered in the UAE are required to submit the CbCR notification. Furthermore, secondary filing is not required in the UAE, and Special Purpose Entities (SPE) filing is not allowed. These adjustments make the UAE’s legislation more business-friendly while maintaining stringent compliance standards. 

Conclusion 

The UAE’s proactive approach to implementing and updating CbCR regulations demonstrates its dedication to fostering a transparent and cooperative international tax environment. By aligning with OECD standards and continuously refining its legislative framework, the UAE ensures that its tax reporting requirements are robust, fair, and conducive to business operations. MNEs operating within the UAE must remain vigilant and compliant with these regulations to avoid substantial penalties and contribute to the global effort to enhance tax transparency. 

Summary

The UAE has advanced its tax transparency and international cooperation through the implementation of Country-by-Country Reporting (CbCR) regulations. Beginning with its commitment to the BEPS Inclusive Framework in 2018, the UAE introduced CbCR regulations in 2019, effective from January 1st, to enhance tax transparency for MNEs. Updates in 2020 ensured compliance with OECD standards, focusing on UAE-headquartered MNE groups with consolidated revenue exceeding AED 3.15 billion. 

Disclaimer: The Content offers general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk. 

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