According to Law XIII of the Agreement on Base Erosion and Profit Transfer, reporting by country for the multinational companies, led by OECD in cooperation with the Group of Twenty.
Large multinational groups are required to submit company-specific financial reports containing detailed data on:
- The value of the multinational group’s global revenue.
- Earnings before tax and income tax due.
- Indicators of economic activities for each entity of the group in accordance with the economic laws governing reporting by country in each country.
On 30 April 2019, Cabinet Resolution No. 32 of 2019 was issued regarding the requirements of reporting by country CBCR in the UAE.
The reports submitted by multinational companies are part of the thirteenth procedure of the BEPS Agreement.
The purpose of reporting provided by multinational corporations is to eliminate any information gap between taxpayers and tax administrations regarding information regarding where economic value is created within the multinational group and whether it matches where profits are allocated and taxes are paid globally.
Reporting by Country in UAE
The OECD Handbook on Reporting by Country Reporting by Multinational Firms can be used to ensure that the same standardized approach to multinational corporate reporting is followed.
However, it should be noted that there are some differences between the ECO legislation and the UAE’s legislation on reporting to multinational companies, in which case the priority is to follow the UAE legislation’s approach to reporting.
Uses of Multinational Company Reports
There are only three authorized uses in the Base Erosion and Profit Transfer Agreement for reporting from multinational corporations on reporting by country, namely:
- High-level risk assessment of transaction pricing.
- Assess other risks related to base erosion and profit shifting.
- Conduct economic and statistical analyses when necessary.
The UAE Ministry of Finance guarantees the confidentiality of this information and that it will not be used for purposes other than those mentioned above.
Country-Specific Report Notice
A report containing aggregate and qualitative information on multinational companies should be prepared with an analytical statement on the value of revenues, profits, number of employees and job descriptions in three tables:
- Table I: includes aggregated information for each tax authority such as the value of third-party and related party revenues, declared capital, taxes due and paid, and number of employees.
- Table II: It includes qualitative information for each member entity on the main commercial economic activities carried out by the group entities conducted during the year.
- Table III: contains additional information necessary to read and understand the previous two tables.
Groups of companies requesting reporting report by country
Companies based in the UAE must meet certain criteria, namely:
- Multinational corporate groups, which are groups consisting of two or more enterprises for tax purposes residing in different jurisdictions. ‘This includes a company that is resident for tax purposes in one jurisdiction and has a permanent taxable establishment in another jurisdiction as a separate enterprise in the context of this definition’.
- Total consolidated revenues equal to or greater than AED 3,150,000,000 for the financial year preceding the reporting year.
Sources of information covered in the report
The entity responsible for reporting by country must use the same sources of information from year to year at the time of the report’s work, and data can be obtained from the following sources:
- Consolidated report files.
- Legal financial statements of the separate entity.
- Organizational financial statements.
- Accounts of internal departments.
CbCR requirements apply to ‘financial reporting years’ beginning on or after January 1, 2019. Accordingly, for the financial reporting year commencing January 1, 2019, the multinational companies report must be submitted no later than December 31, 2020.
As AHG is an authorized tax agent in the UAE Free Trade Area and one of the leading tax agencies specializing in excise taxation, AHG’s services range from selective tax registration, selective tax filing, tax consultancy, warehouse keepers, designated area registration, inventory calculation fees, warehouse advice, tax agent, digital tax stamps on Sultan Alsi, raising disputes, and representation before the UAE Free Trade Agreement Preparation and submission of reporting by country