8. What is a CbC Report?
A report including quantitative and qualitative information about the MNE Group. Information such as revenues, profits, employees count, business description, etc. should be reported under three tables:
- Table I – This contains the quantitative information per tax jurisdiction such as third party and related party revenues, stated capital, taxes accrued and paid, employee count, etc.
- Table II – This contains the qualitative information per constituent entity on the main business activities undertaken during the year.
- Table III – This contains any additional information necessary to facilitate the understanding of Tables I and II (e.g. assumptions on exchange rates, source of data, etc.)
9. Which groups of companies will be required to comply with CbC Reporting Legislation in the UAE?
Groups of companies that meet the following criteria should comply with CbC Reporting legislation in the UAE:
- MNE Groups i.e. Groups which consist of two or more enterprises that are residents for tax purposes in different jurisdictions (an enterprise that is resident for tax purposes in one jurisdiction and has a taxable permanent establishment in another jurisdiction should be considered as a separate enterprise in the context of this definition); and
- Have a total consolidated revenue that is equal to or more than AED 3,150,000,000 for the financial year preceding the reporting year concerned.
ILLUSTRATION
For the MNE Group’s CbCR threshold assessment for the reporting year ending by December 31st, 2019 (Y) a check should be done on the MNE Groups’ consolidated revenues for the financial year ended per December 31st 2018 (Y-1)
Case 1: an MNE Group had a consolidated revenue of AED 3,500,000,000 during the financial year ending December 31st, 2018. In this case, for the CbCR reporting year 2019, the MNE Group meets the CbCR revenue threshold and will need to comply with CbC Reporting legislation in the UAE for the reporting year 2019.
Case 2: an MNE Group had a consolidated revenue of AED 3,000,000,000 during the financial year ending December 31st, 2018. In this case, for the CbCR reporting year 2019, the MNE Group does not meet the CbCR revenue threshold and does not need to comply with CbC Reporting legislation in the UAE for the reporting year 2019.
10. When do the CbC Reporting requirements come into effect in the UAE?
CbC Reporting requirements come into effect for financial years starting on or after January 1st 2019.
11. When must a CbC Report be filed with the UAE?
The CbC report should be filed within 12 months from the end of the reporting year of the MNE Group. E.g. With respect to the financial year commencing on January 1st 2019 and ending by December 31st 2019, the CbC Report should be filed no later than December 31, 2020.
12. Which entity within the MNE Group should be primarily responsible for filing the CbC Report in the UAE?
The UAE tax resident entity, which is an Ultimate Parent Entity of the MNE Group subject to the CbC Reporting Legislation as clarified under question 9 above.
13. Who should be considered as a ‘UAE tax resident entity’ for CbCR purposes?
Based on the existing UAE laws and international tax treaties, an entity should be considered as a tax resident in the UAE if it is incorporated or created under the laws of UAE or has its place of effective management therein.
14. When can a Surrogate Parent Entity be appointed to file the CbC Report in the UAE?
A Surrogate Parent Entity can be appointed by an MNE Group to file the CbC Report in the UAE instead of the Ultimate Parent Entity where both A and B below are satisfied:
A. One or more of the following circumstances applies:
-
The Ultimate Parent Entity of an MNE Group is not required to file a CbC Report in its jurisdiction of tax residence; or
-
The jurisdiction in which the Ultimate Parent Entity of that MNE Group is resident for tax purposes does not have a qualifying competent authority agreement in effect with the UAE (by the due date for filing the CbC Report) that provides for the exchange of CbC Reports; or
-
There has been a systemic failure by the jurisdiction of tax residence of the Ultimate Parent Entity of that MNE Group to exchange the CbC Reports in its possession and the UAE Competent Authority (UAE Ministry of Finance, MoF) has notified the UAE tax resident constituent entity that such a failure has occurred;
AND
B. The jurisdiction in which the Surrogate Parent Entity is resident for tax purposes:
i. Requires the filing of CbC reports; or
ii. Has a qualifying competent authority agreement in effect with the UAE (by the due date for filing the CbC Report) that provides for the exchange of CbC Reports; or
iii. Has not notified the MoF of an event of systemic failure; or
iv. Has been notified of the identity of the Surrogate Parent Entity; or
v. A notification has been provided to the UAE Tax Department setting out the name and jurisdiction of tax residence of the Surrogate Parent Entity and its tax identification number.
15. What are the obligations of a UAE entity which has been appointed as a Surrogate Parent Entity?
Where a UAE tax resident constituent entity is appointed as a Surrogate Parent Entity, the UAE CbC Reporting legislation applies as if that entity were an Ultimate Parent Entity. Therefore, a UAE tax resident constituent entity which has been appointed as a Surrogate Parent Entity must file a CbC report to the MoF on behalf of the entire MNE Group.
16. What sources of information should be used for preparation of the CbC report?
The entity filing the CbC Report should consistently use the same sources of data from year to year in completing the CbC Report. The data can be obtained from the following sources:
- Consolidation reporting packages; or
-
Separate entity statutory financial statements; or
- Regulatory financial statements; or
- Internal management accounts.
The entity preparing the CbC Report should provide a brief description of the sources of data used and explain reasons for any changes in sources of information from year to year in the Additional Information section (Table III) of the CbC Report.
17. Is there any specific guidance on how to complete the CbC Report?
[More guidance on the completion and filing of the CbC Report in the UAE will be provided soon]
18. How should the CbC Report be filed?
[More guidance on the completion and filing of the CbC Report in the UAE will be provided soon]
19. What currency should be used for CbC Reporting purposes?
If separate entity statutory financial statements are used as the basis for reporting, all amounts should be translated to the stated functional currency of the MNE Group. The average exchange rates for the year should be used for currency conversion. The applied rates should be stated in the Additional Information section (Table III) of the CbC Report.
20. In which language should the CbC Report be submitted in the UAE?
The CbC Report should be submitted in English.
21. How should information on permanent establishments (including branches) be reflected in the CbC Report?
Permanent establishment data should be reported by reference to the tax jurisdiction in which the permanent establishment is situated and not by reference to the tax jurisdiction of residence of the entity of which it is a permanent establishment. Information reported by reference to the residence tax jurisdiction of the entity of which it is a permanent establishment should exclude financial data related to the permanent establishment.
Example: The UAE entity has a branch in the UK, The CbC Report should reflect revenue, profit and other indicators of the branch as related to the UK. Data for the UAE entity should be presented after exclusion of information related to the UK branch.
