The United Arab Emirates (UAE) has ratified the Base Erosion and Profit Shifting Framework in 2018. Recently, UAE’s Ministry of Finance passed Cabinet Resolution Number 32 of 2019 related to Country-by-Country Reporting (CbCR) compliance obligations (CbCR Rules) for multinational companies/entities (MNE) based in or operating from the UAE. The CbCR Rules shall be in effect for financial year from January 1, 2019 and the financial year starting from 2019 shall be the first reporting year.
The CbCR Rules of UAE shall be applicable to multinational corporations which has following qualifications:
- A consolidated revenue of AED 3.15 billion;
- The ultimate parent company is resident of UAE of the MNE group;
- If the constituent entity of the MNE group is a UAE resident and the parent company nominates it as Alternate Parent Entity (APE);
- If constituent entity of MNE group is UAE resident.
The report on CbCR shall be filed within 12 months of the closure of reporting period hence if the financial year commenced on 1 January, 2019 then the CbC Report must be submitted within 12 months from end of year 2019 i.e. by 31 December, 2020. The Cabinet Resolution also provides clarification that such CbC Report shall be filed electronically. Also, the format and content of CbC Report shall be the one as suggested by Organization for Economic Cooperation and Development i.e. OECD.
The Cabinet Resolution Number 32 of 2019 mentions the penalty that would be imposed if the companies fail to comply with the law. The penalty suggested are heavy ones such as failure or delay in submission of CbC Report once 12 months deadline is crossed is AED 1,000,000 plus 10,000 per day during which failure continues upto maximum of AED 250,000. Also, inaccurate and incomplete CbC Report shall attract penalty of minimum AED 50,000 to maximum AED 500,000.
With the rules in force by the UAE Government, in the latest peer review consultation/round table of OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, UAE has received rating of “largely compliant”.
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