Tax Flash - 25/08/2020

The United Arab Emirates (UAE) is a member of the Organisation for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS). As such, the UAE committed to implementing BEPS Action 13, related to transfer pricing documentation and Country-by-Country (CbC) reporting.

In 2019, the UAE Ministry of Finance (MoF) issued Cabinet Resolution No. 32 of 2019 (Resolution 32/2019 or former Resolution) on the submission of reports by multinational enterprises (MNEs).

Recently, the UAE MoF issued Cabinet Resolution No. 44 of 2020 (Resolution 44/2020), concerning the organization of reports submitted by MNEs, which overrides Resolution 32/2019.

Under Resolution 44/2020, the reporting entity definition has been amended to specify that the ultimate parent entity (UPE) of an MNE group, tax resident in the UAE, is the only entity of the MNE group required to comply with CbC reporting obligations.

As such:

• CbC notification: Each UPE of an MNE group, tax resident in the UAE, is required to notify the competent authority that it is the entity responsible for filing the CbC report. The former Resolution provided a wider scope of application for the notification, whereby all constituent entity(ies) of an MNE group, tax resident in the UAE, were required to comply with such notification. As such, only the UPE is henceforth required to file the notification. Identical to the former Resolution, the notification is to be submitted no later than the last day of the group's reporting fiscal year.

• CbC report: Each reporting entity (UPE) of an MNE group, tax resident in the UAE, is required to file the CbC report in the UAE within twelve (12) months following the last day of the reporting fiscal year of the MNE group. All provisions in respect of the surrogate parent entity have been removed under Resolution 44/2020.

Provisions pertaining to applicable threshold, penalties, timelines and information required under CbC reporting are consistent with the former Resolution.

We still await guidance from the UAE MoF on the following:

• The CbC report completion and submission process. The online portal and guidance are expected to be released in the upcoming months.
• The automatic exchange process of CbC reports with other jurisdictions. The UAE MoF is yet to formalize its ‘non-reciprocal jurisdiction’ status.

This publication is of a general nature only. Specific professional advice must be obtained before making a decision. Our publication should not be considered legal advice or a substitute for seeking local legal advice. Laws and regulations in the UAE are changing constantly. The information contained within this publication is based on facts available as of 25 August 2020 and is subject to change.