Economic Substance Regulation and Country by Country Reporting Purpose in the UAE

Particulars

Economic Substance Regulation

Country by Country Reporting

Regulation No.

Cabinet of Ministers Resolution 31 of 2019

Cabinet of Ministers Resolution 32 of 2019

BEPS Action Plan

Action 5

Action 13

Purpose

To prove the substance over form

To eliminate the gaps (if any) in information between Taxpayers and Tax Authorities with regards to information on economic value generated by MNE Groups.

Applicable to:

Licensee carrying out any of the following Relevant Activities:

1. Banking Business
2. Insurance Business
3. Investment Fund Management Business
4. Lease-Finance Business
5. Headquarters Business
6. Shipping Business
7. Holding Company Business
8. Intellectual Property Business
9. Distribution and Service Centre Business

MNE Group

• includes 2 or more enterprises the tax residence for which is in different jurisdictions/country, or includes an enterprise that is resident in one country and is subject to tax with respect to business carried through permanent establishment in another country)
• having total consolidated group revenue equal to or more than 3.15 Billion Dirhams (equal to 750 Million Euro) during Fiscal year as reflected in Consolidated Financial Statements for such preceding Fiscal Year.

To whom Notify/Report

Relevant Authority

(i.e. Licensing Authorities for Relevant Activities)

Competent Authority

(i.e. Ministry of Finance)

Notification/ Reporting

The Information Notification is to be filed with the Relevant Authorities within the Due date

The Notification is to be filed by all the Constituent Entities with Competent Authorities in the State.

Report is to be filed by the Ultimate Parent Entity in the State or in its Registered Jurisdiction (wherever applicable).

Particulars

Economic Substance Regulation

Country by Country Reporting

Due Date

To be filed no later than 12 months after last day of the end of each Financial Year of the Licensee.

For Notification:

to be filed no later than the last day of the Reporting Fiscal Year of such MNE Group.

For Report:

To be filed no later than 12 months after the last day of Reporting Fiscal Year of such MNE Group.

Filing Obligation by:

Licensee Carrying out Relevant Activities and is required to satisfy Economic Substance Test.

Constituent Entity of the MNE Group, Ultimate Parent Entity or Surrogate Parent Entity

What is to Notify/Report?

Following Information in respect to the Licensee:

1. Type of Relevant Activity
2. Amount and type of relevant income from Relevant Activity
3. Amount and type of Operating expenditure & Assets in respect of Relevant Activity
4. Location of Business
5. Total number of full-time employees, their qualifications
6. Information showing State Core Income-Generating Activity
7. Declaration whether Economic Substance test is met or not

Notification:

1. Name of the Group
2. Jurisdiction where group is tax resident
3. Whether the UPE is reporting entity
4. List of Constituent Entities under the MNE Group
5. Name of UAE Entity filing CbCR notification

Report:

1. Amount of revenue, profit(loss) before Income-tax, Income-tax paid, Income-tax accrued, stated capital, accumulated earnings
2. Number of Employees
3. Tangible Assets other than Cash & Cash Equivalent with regard to each Jurisdiction in which MNE Group operates.
4. Identification of each constituent entity of MNE Group and its Jurisdiction

Maintenance of Books/ Records/ Documents/ Information

6 years from the end of Financial Year in which the Information Notification is Filed.

5 years after the date of reporting to the Competent Authority

Nature of Offences

Failure to provide the Information

Failure to furnish inaccurate information or knowingly furnishing inaccurate information

Failure to retain the required documents & information

Failure to provide the information to Competent Authority

Failure to Notify or report (as applicable) to the Competent Authority

Failure to provide details in accurate and complete manner

Penalties

AED 10,000/- to AED 300,000/-

AED 50,000/- to AED 1,000,000/-

(in case of delay in filing the Notification or Report within due date the additional penalty amounting to AED 10,000 for every day during which the failure continues to a maximum of AED 250,000)