Understanding Country-by-Country Reporting (CbCR)

CbCR is an integral component of Base Erosion and Profit Shifting (“BEPS”) Action 13, targeting large Multinational Groups of Entities (MNE Groups). These groups are mandated to submit a CbCR, furnishing a detailed breakdown of the MNE Group’s global revenue, profit before tax, income tax accrued, and other indicators of economic activities for each jurisdiction in which the MNE operates.

Purpose of CbCR

The primary objective of CbCR is to bridge the information gap between taxpayers and tax administrations. This report illuminates where economic value is generated within the MNE Group, ensuring alignment with the allocation of profits and tax payments on a global scale.

Key Aspects of CbCR

  • Global Financial Overview: CbCR offers a comprehensive snapshot of the MNE Group’s global revenue, profit, and income tax across various jurisdictions.
  • Economic Activity Indicators: The report encompasses indicators of economic activities, providing insights into the operational landscape of the MNE Group.
  • Enhanced Transparency: CbCR boosts transparency by furnishing tax administrations with detailed information about the MNE Group’s global operations.

CbCR in the United Arab Emirates

The UAE CbC reporting rules are applicable to MNE Groups headquartered in the UAE with consolidated revenue exceeding AED 3.15 billion (approximately EUR 750 million) in the preceding fiscal year.

CbCR is a standardized document that furnishes information regarding global income allocation, taxes paid, and economic activity indicators of the MNE Group across various tax jurisdictions. Additionally, it enumerates the MNE Group’s Constituent Entities (CE) for which financial information is reported, inclusive of the tax jurisdiction of incorporation, as well as details of the primary business activities carried out by the CE.

The Ultimate Parent Entity (UPE) is required to submit a CbC notification for each reporting Fiscal Year, due by the end of that year. This notification designates the UPE as the reporting Entity for CbC reporting.

The CbC report must be filed within 12 months after the end of the UAE MNE Group’s reporting year.

The information required to be disclosed in the CbC report follows Annex III to Chapter V of the Organisation for Economic Co-operation and Development (“OECD”) Guidelines.

Penalties for Non-Compliance:

  • Failure to file the CbCR or CbCR notification on time incurs an administrative fine of up to AED 1,000,000, with an additional AED 10,000 for each day of failure, up to a maximum of AED 250,000.
  • Failure to maintain information and documentation for five years results in a penalty of AED 100,000.
  • Failure to provide any other requested information carries a penalty of AED 100,000.

Cabinet Resolution No. 44 of 2020 provides guidance on CbC reporting requirements, preparation, and submission, which Taxable Persons should consult for practical guidance.

AMA Audit Tax Advisory offers assistance to you and your business in fulfilling and complying with the process, procedures, and submission of your CbCR Notification and CbC Report.

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