Transfer Pricing UAE: Know All About CbCR Reporting

Multinational companies (MNEs) operate in several countries, shifting profits across borders to minimise taxes. When this happens without transparent reporting, tax authorities are left guessing. The result? Some countries lose billions in tax revenue, while others become havens for large amounts of money.

To address this, the UAE has implemented Country-by-Country Reporting (CbCR), a global standard established by the OECD and G20 countries, to ensure transparency. If you run or work with a MNE in the UAE, this is something you must understand and follow.

Tax Gian, your first-choice tax agents in the UAE, will help you understand CbCR and comply with its requirements. 

What is CbCR?

CbCR is a reporting requirement under Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) plan. It forces large multinational groups to submit a detailed report showing how much revenue, profit, and tax they generate in each country they operate in. This includes employee numbers, business activities, and other economic data.

The report helps tax authorities see if profits are being reported where the actual work is being done or if they are being systematically shifted to low-tax regions.

UAE’s Legal Framework

The UAE made CbCR mandatory through Cabinet Resolution No. 44 of 2020, replacing the earlier Resolution No. 32 of 2019. The law applies to UAE-headquartered multinational groups whose total consolidated revenue exceeds AED 3.15 billion (approximately Euro 750 million) in the previous financial year.

CbCR in the UAE applies to financial years starting on or after January 1, 2019. 

Who Must Report?

To fall under UAE CbCR rules:

• Your company must be part of a multinational group with operations in more than one country.
• The group’s total revenue must be equal to or more than AED 3.15 billion during the fiscal year immediately preceding the reporting year.
• The UAE-based ultimate parent company (UPC) is the one responsible for filing the report.

If your group doesn’t meet this threshold, CbCR does not apply. You can also seek help from tax agents in Dubai to better understand your liabilities. 

Key Deadlines

• CbCR Notification: Must be submitted no later than the last day of the taxable year. This keeps the Federal Tax Authority (FTA) informed about the reporting entity (i.e. the UPE) which will file the CbCR.
• CbCR Report: Must be filed within 12 months after the end of the reporting year.

So, if your reporting year has ended on December 31, 2024, you should have notified the Federal Tax Authority (FTA) by December 31, 2024 and must submit the CbC report by December 31, 2025.

What’s included in the CbC Report?

CbCR in the UAE follows the OECD standard format, made up of three tables:

1. Table 1 – Financial Data

Includes figures like revenue from related and unrelated parties, profit before tax, income tax paid and accrued, stated capital, number of employees, and tangible assets per country.

2. Table 2 – Activities by Entity

 Lists each entity’s main business activities (manufacturing, R&D, services, etc.).

3. Table 3 – Additional Information

It consists of additional information related to table 1 and 2 that provides  further explanation. 

Language, Format, and Currency

• The report must be filed in English.
• All data should be based on the group’s financial statements, translated into the group’s functional currency using average yearly exchange rates.
• You should keep a clear record of the sources used, especially if they change from one year to another.

Tax agents in the UAE can help you prepare your CbC report with precision and accuracy. 

Fines and Penalties for failure to file CbCR

Administrative penalties apply to Reporting Entities and Ultimate Parent Entities for non-compliance with the CbCR filing requirements as well as maintenance of relevant documentation. A fine of AED 100,000 is imposed for failing to provide required information and penalties ranging from AED 50,000 to AED 500,000 apply for incomplete or inaccurate reporting. Ultimate Parent Entities missing notification deadlines face an AED 1,000,000 fine plus AED 10,000 per day of continued delay, capped at AED 250,000. Except for additional daily penalties, the total fine per fiscal year for any entity is capped at AED 1,000,000.

Confidentiality and Use of Data

The UAE Ministry of Finance ensures that the information provided in CbC Reports stays confidential. The data will be used only for:

• Reviewing high-level transfer pricing risks
• Assessing BEPS-related risks
• Performing economic and statistical analysis

The information will not be used for audits or enforcement unless there is a clear risk identified.

Keeping Records

The company that files the CbC report in the UAE must keep supporting records for five years. These records can be digital, but must stay readable and accessible under UAE laws.

Special Cases: Permanent Establishments

If a UAE entity has a branch in another country, like the UK, its revenue, profit, and other financial indicators must be reported under that foreign country in the CbCR. The UAE data should exclude the branch’s financials. This avoids reporting the same numbers twice. Get fresh insights on this matter from tax agents in Dubai.

Sources of Data

You can use one or more of these sources, but stay consistent:

• Consolidation reporting packages
• Separate financial statements of each entity
• Regulatory filings
• Internal management accounts

If you switch your data source between years, explain the reason in Table 3.

How can Tax Gian Assist?

CbCR is not optional for large UAE-based multinationals. If your group crosses the revenue threshold and operates in multiple countries, you must comply with CbCR requirements. 

If you are unsure where to begin, it’s best to consult with our tax professionals at Tax Gian, who are acquainted with UAE transfer pricing rules and CbCR filing. They will provide you with complete guidance and even help you prepare your CbC report.