Following UAE’s commitment as an inclusive framework member to endorse the minimum BEPS standards, the UAE Cabinet has issued CbC reporting regulations dated 30 April 2019 effective for financial years beginning on or after 1 January 2019. Prior to these regulations, large MNE groups with their headquarters in the UAE were filing CbC reports with the jurisdiction of the Surrogate Parent Entity (SPE) appointed for this purpose. In future, these groups will need to file their CbC reports with the UAE’s Ministry of Finance (MoF). Additionally, UAE-based constituent entities of MNEs with headquarters overseas will have an additional CbC notification requirement in the UAE by 31 December 2019.
The UAE CbC reporting requirements are in line with the CbC legislations introduced by most countries and the BEPS report on Action 13. The regulations apply to UAE entities that are resident for tax purposes and are members of a multinational group having annual consolidated revenues of AED 3.15 billion or more (in line with the OECD prescribed threshold of EUR 750 million) in the preceding year. The regulations require the following compliances by qualifying entities resident for tax purposes in the UAE:
- Notification to the MoF regarding the details of the ultimate parent entity/reporting entity and constituent entities in the UAE by the end of the year (31 December 2019 for the year ended 31 December 2019); and
- Filing a CbC report by the Ultimate Parent Entity/SPE (if the UAE entity is appointed as an SPE by the group) with the MoF within 12 months from the end of the year (31 December 2020 for the year ended 31 December 2019).
The online portal for filing reports and notifications has been under construction since November 2019. The UAE CbC regulations allow for selection of a UAE entity as an SPE for the group, provided conditions for appointing an SPE are met.
The regulations also provide for administrative penalties in the event of default as follows:
- AED 1,000,000 + AED 10,000* (up to a maximum of AED 250,000) per day for failure to file a CbC report/notification on or before the prescribed due date;
- AED 100,000 for failure to retain the documentation and information required for a minimum period of five years after the reporting date;
- AED 100,000 for failure to provide information in the event of any inquiries; and
- AED 50,000 to AED 500,000 for failure to report information in a complete and accurate manner.
To facilitate the exchange of CbC reports filed in the UAE with other countries, the UAE signed the CbC Multilateral Competent Authority Agreement in June 2018 and currently has active relationships with 49 countries, which increases its attractiveness as a choice for SPE jurisdiction. Currently, the UAE is a non-reciprocal jurisdiction which means that it will not be receiving any CbC reports filed in other countries.
While the UAE does not currently have a corporation tax regime, other than for foreign oil and gas companies and branches of foreign banks, in the event that the UAE does introduce corporation tax, one can expect detailed transfer pricing regulations and a reciprocal exchange of CbC reports to be introduced.
* 1 EUR is approximately 4.05 AED
