CbCR threshold

The CbCR requirements apply to entities that are tax resident in the UAE (hereinafter, “tax resident in the UAE”) and are part of a multinational group of enterprises (“MNE”) with consolidated revenues equal to or exceeding AED 3.15 billion (circa USD 857 million) in the financial year preceding the ‘financial reporting year’ concerned.

CbCR filing requirements

The Resolution places a requirement on MNEs with an ultimate parent entity (“UPE”) that is tax resident in the UAE and exceeds the AED 3.15 billion consolidated revenues threshold, to file a CbC report within 12 months after the end of the financial reporting year.

The Resolution states that any affiliated entity of an MNE that is tax resident in the UAE but is not the UPE, shall prepare and submit the CbCR on behalf of the MNE if certain conditions are met.

However, where the tax resident entity in the UAE is not a UPE, a notification (discussed below) in lieu of an actual filing would satisfy the CbCR requirements, so long as the MNE has filed the CbCR in the UPE’s tax jurisdiction or in a Surrogate Parent Entity’s (“SPE”) tax jurisdiction, and certain conditions in relation to automatic exchange of the CbCR, by such tax jurisdictions with the UAE, are met.

CbCR notification requirements

Any affiliated entity of an MNE that is tax resident in the UAE, shall notify the Competent Authority (i.e. the UAE Ministry of Finance, MOF) whether it bears the capacity of an ultimate or surrogate parent entity, (“SPE”) no later than the last day of the financial reporting year of such MNE.

If such entity is not a UPE nor an SPE, it shall notify the Competent Authority of the identity of the entity submitting the CbCR and its tax residence, no later than the last day of the financial reporting year of such MNE.

Important filing dates

The CbCR requirements are applicable to financial reporting years starting on or after January 1st, 2019, and the CbCR is required to be submitted within 12 months from the end of the financial reporting year.

Accordingly, for the financial reporting year starting on January 1st, 2019, the CbC report must be submitted latest by December 31st, 2020.

CbCR notifications must be submitted by an MNE affiliated entity that is tax resident in the UAE, no later than the last day of the financial reporting year of the MNE. Accordingly, for the MNE financial reporting years starting on 1 January 2019, notifications are due by no later than 31 December 2019.

Administrative penalties

The Resolution imposes four types of administrative penalties on UAE tax resident entities subject to the CbC reporting/notification requirements as per the following:

• Failure to keep documents and information: An administrative fine of AED 100,000 is applicable in case of failure to keep the documents and information required under the Resolution for a period of no less than five years from the date on which the CbCR is submitted to the Competent Authority.
• Failure to provide information: an administrative fine of AED 100,000 is applicable in case of failure to provide the Competent Authority with any information required in accordance with the CbCR and notification requirements.
• Failure to report information for reporting/notification purposes: an administrative fine of AED 1,000,000 (plus AED 10,000 for each day of failure up to a maximum of AED 250,000) is applicable in case of failure to report the information required on the reporting date fixed, or in case of failure to notify the Competent Authority, on or prior to the date fixed for reporting, of the intention to submit the CbCR with respect to a particular accounting period.
• Failure to provide full and accurate information: an administrative fine of no less than AED 50,000 and not exceeding AED 500,000 is applicable in case of failure to report full and accurate information.

Except for the additional fine provided for under (C.), the total fines imposed for any of the violations above may not exceed, within any financial reporting year, the sum of AED 1,000,000.

Further, the Resolution outlines in detail the procedures for imposing the administrative penalties as well as procedures for appealing the decision(s) imposing such penalties.

Other important considerations

Retention of effective records

The Resolution imposes a requirement to retain effective records for 5 years following the date on which the CbCR is submitted to the Competent Authority. The aforementioned records may be kept electronically, provided it is a compliant and readable electronic format.

Language considerations

In case records are created and/or kept in a language other than English, translation (to English) shall be provided upon request by the Competent Authority.

Reporting avoidance

In case a tax resident entity that is subject to CbC reporting/notification requirements, concludes any arrangements or engages in any activity which could reasonably be deemed to have mainly aimed at avoiding the obligations imposed under the Resolution, such entity shall remain liable as if none of such arrangements have been concluded