UAE amends country by country report regulations (“CbCr”)

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Introduction

The Government of UAE, as an important step towards aligning with OECD’s BEPS(Base Erosion & Profit Shifting) Action Plans and affirming its commitment in addressing concerns around the shifting of profits to “no or nominal tax jurisdictions” without corresponding local economic activities, inter alia, had issued Country by Country Report Regulations (the “CbCr” / the “Regulations”) vide Cabinet Resolution No. 32 of 2019 dated 30 April 2019.

On 4 June 2020, the Government of UAE has amended the CbCr vide Cabinet Resolution No. 44 of 2020 (“Amended CbCr” / “Amended Regulations”), thereby repealing Resolution No. 32 of 2019.

The obligation of filing of the Country by Country Report (“CbC Report”) was effective 1 January 2019.

The Amended CbCr effectively narrows down the scope of the Regulations, limiting its applicability to only UAE headquartered multinational enterprise (“MNE”) group whose consolidated revenues exceed AED 3,150,00,000 in the fiscal year (“FY”) immediately preceding the reporting fiscal year.

Key amendments are discussed as under:

  • The definition of the Reporting Entity has been amended to annul the secondary filing of CbC Report in UAE as under:

    Definition as per earlier Regulation

    Definition as per Amended CbCr

    Reporting Entity was defined as an entity that was required to file a CbC Report pursuant to the provisions of Article 2 of the Regulation. Article 2 of the Regulation entrusted filing obligation of the CbC Report in the UAE on:

    – Ultimate Parent Entity (“UPE”) of the MNE group which was tax resident in the UAE;

    OR

    – Constituent Entity (“CE”) of the MNE group (which is not the UPE) which is tax resident in the UAE subject to certain conditions (commonly referred to as ‘Secondary Filing’ requirement)

    Reporting Entity is now simply defined as the UPE of the MNE group whose tax residence is in the UAE and is required to submit the CbC Report.

    With the simplified definition of the Reporting Entity, the Amended Regulations apply only to UPE of the MNE group which is tax resident in the UAE.

    It appears that the Amended CbCr does away with the requirement of secondary filing of the CbC Report by the CE of the MNE group which is tax resident in UAE.

  • Similar to the amendment in relation to CbC Report filing requirements, CE of the MNE group which is tax resident in the UAE is now not required to file the annual notification with the Government of UAE.

  • The provisions in relation to use and confidentiality of the CbC Report by the Government of UAE are amended in a manner which empowers the Government of UAE to assess the transfer pricing aspects of the Reporting Entity categorized as “high-risk”.

  • Administrative penalties for offences are provided as under:

    x

    Administrative Penalty

    Failure to file the CbC Report within the stipulated deadline

    AED 1,000,000
    AND
    AED 10,000 for each day for which the failure continues with the maximum penalty of AED 250,000 (referred as ‘additional penalty’)

    Failure to maintain documentation and information for minimum five years from the date of reporting

    AED 100,000

    Failure to provide any information called for by Competent Authority under the Regulations

    AED 100,000

    Failure to report the information in a complete and accurate manner

    From AED 50,000 to AED 500,000

    Failure to submit the annual notification by UPE within the stipulated timeline

    AED 1,000,000
    AND
    AED 10,000 for each day for which the failure continues with the maximum penalty of AED 250,000 (referred as ‘additional penalty’)

    The Amended Regulations also clarify that except in the case of additional penalty (as referred above) which may be levied, the total penalty shall not exceed AED 1,000,000 for any particular Reporting Fiscal Year.

  • The above penalties, if levied, can now be reduced at the discretion of the Ministry of Finance (“MOF”) being the Competent Authority.

  • MOF may also issue necessary resolutions for the implementation of the provisions of the Amended CbCr.

How can PKF UAE assist?

  • PKF UAE can help you get a clear understanding of the Amended CbCr, its requirements and obligations under the Amended CbCr;

  • It can study whether your business shall be covered under the provisions of the Amended Regulations;

  • It can assist in undertaking relevant compliances under the Amended Regulations.

Contact us

You may email us or contact any of our team members relating to your queries on this subject:

Stany Pereira

Sarika Dhameja

 Vinit Gala / Ronak Desai

Managing Partner

Director – Tax Services

Assistant Manager – Tax Services

stany@pkfuae.com

sdhameja@pkfuae.com

vgala@pkfuae.com / rdesai@pkfuae.com