Background

  • Keeping with United Arab Emirates (UAE) commitment to implement recommendations of Action Plan 13 - Base Erosion and Profit Shifting (BEPS), UAE issued the Cabinet Resolution No. 32 of 2019 (the Resolution) on Country-by-Country Reporting (CbCR) on 30 April 2019. The Official Gazette of Ministry of Finance of UAE recently published the resolution.
  • Presently, UAE regulations do not require taxpayers to prepare master files and local file. Similarly, UAE doesn't need filing or reporting of related party transactions (such as Form Controlled Transactions Disclosure Form as prescribed in Saudi Arabia or Form No. 3CEB as prescribed in India).
  • Traditionally, the Gulf Co-operation Council (GCC) isn't seen as a region where transfer pricing or taxation proposals are a priority for the Government. However, with the introduction of CbCR in Qatar, KSA, and now in UAE, multinationals in the region would need to understand the importance of transfer pricing and need to be more cautious about intra-group transactions.
  • It is recommended for multinationals to proactively revisit their existing transfer pricing policy and business structure to mitigate/avoid future risk in the transfer pricing domain.

We have tabularized essential aspects of the Resolution below for easy understanding.

Sr. No. Particulars Details
1 Threshold for applicability The consolidated turnover of group >= AED 3.15 billion (approx Euro 750 million) in preceding reporting fiscal year
2 Applicable from which reporting fiscal year The reporting fiscal year starting on or after 1 January 2019
3 Filing obligation including deadline
Form to be submitted To be submitted by Timeline to submit
Detailed CbCR Ultimate parent entity/Surrogate parent entity* 12 months from reporting fiscal year of Group
Notification Ultimate parent entity/Surrogate parent entity/Constituent entity Last day of the reporting fiscal year of Group

*In certain conditions as provided in the Resolution, Constituent entity resident in UAE may also be required to submit detailed CbCR in UAE instead of Ultimate Parent Entity/Surrogate Parent Entity.
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 Contents of CbCR
Following country-wise information should be submitted wherever the group has presence/activity:
  • Revenue, profit (or losses) before tax, income-tax paid/payable, declared capital, accrued profits, the number of employees, and non-cash or cash-equivalent assets.
  • Identity of each constituent entity of group including country of residence, country of establishment, and nature of the business activity
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 Maintenance of records required Records need to be maintained until five years from the date on which CbCR is submitted
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 Administrative Offences and Penalties
Administrative Offences Quantum of Penalty
Failure to maintain documents for less than five years AED 100,000
Failure to provide information to Competent Authority AED 100,000
Failure to report information or failure to submit a notification by due date* AED 1,000,000 + AED 10,000 per day of failure (subject to maximum of AED 250,000)
Failure to report information accurately AED 50,000 to AED 500,000

* Except this penalty, total penalty for an entity for one reporting fiscal year shall not exceed AED 1,000,000.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.