UAE: Country-by-country reporting requirements
UAE: Country-by-country reporting requirements
The United Arab Emirates (UAE) has introduced country-by-country (CbC) reporting requirements as well as economic substance regulations.
With this action, the UAE is the third Gulf Cooperation Council (GCC) member state to adopt CbC rules. Previously, Saudi Arabia included CbC reporting requirements in the transfer pricing rules, and Qatar introduced CbC reporting requirements.
In the UAE:
- CbC reports will be required of entities that are “tax residents” in the UAE and also part of a multinational enterprise (MNE) having consolidated revenues equal to or exceeding AED 3.15 billion (approximately €760 million or U.S. $855 million) in the preceding financial year.
- The UAE-based entity of an MNE must notify the competent authority (the UAE Ministry of Finance) if it is an ultimate parent entity or if it will serve as a surrogate parent entity appointed to file the CbC report on behalf of the MNE, or must notify the Ministry of Finance of the identity and tax jurisdiction of the enterprise that will be submitting the CbC report. This notification is required before the end of the financial reporting year of the MNE. The CbC report must then be filed within 12 months from the end of the financial reporting year of the MNE. The first financial reporting period begins from 1 January 2019.
- The CbC reporting rules generally are in line with guidance issued by the OECD with respect to the content and format of CbC reports. This includes aggregate financial information (relating to the amount of revenue, profits/losses before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than non-cash or cash-equivalent assets), along with details about business activities conducted and other disclosures and explanations provided by the MNE, with respect to each jurisdiction in which the MNE operates.
- Failure to comply with the CbC rules may result in the imposition of penalties.
KPMG observation
UAE-based MNEs that are within the scope of the CbC reporting requirements need to consider what actions to take with regard to their initial reporting strategy—but equally important, need to understand how the CbC reporting requirements apply to their organization and in what way the information could be interpreted by (multiple) tax authorities. UAE-headquartered MNEs that have previously filed a CbC report in a “surrogate parent entity” jurisdiction need to reconsider whether such practices can continue going forward. Foreign-headquartered MNEs may also need to re-evaluate their CbC reporting strategy since it now may include UAE considerations.
Read a July 2019 report prepared by the KPMG member firm in the UAE
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