The OECD introduced the Local File / Master File back in 2015 as part of its Base Erosion and Profit Shifting (BEPS) project. Since then, many countries mandated the requirement for preparing and maintaining the local transfer pricing documentation.
The UAE introduced its transfer pricing rules as part of the corporate tax law. transfer pricing documentation is an integral part of the UAE transfer pricing regulations, which consists of the Transfer Pricing disclosure form, the Master File, the Local File and the Country-by-Country Report (CbCR).
Transfer pricing consultants in the UAE can help you master the documentation requirements through valuable advice. In this blog, we will discuss the CbCR requirements as highlighted in the UAE transfer pricing guidelines. Read ahead for more insights:
What is Country-by-Country Reporting?
CbCR is OECD’s third tier of Transfer Pricing documentation set in BEPS Action 13 (the other two being the Master File and the Local File).
CbCR is a standard report that provides aggregate tax jurisdiction information relating to the global allocation of income, the taxes paid, and certain indicators of the location of economic activity among tax jurisdictions in which the MNE Group operates.
Key Information Included in CbCR
The CbCR must contain a listing of all the Constituent Companies for which financial information is reported, including the tax jurisdiction of incorporation, where different from the tax jurisdiction of residence, as well as the nature of the main Business Activities carried out by that Constituent Company. Providers of the best transfer pricing documentation services in the UAE can help you ensure all the mandatory information is listed in the CbCR.
Mandatory Threshold for Submitting CbCR in the UAE
As per the UAE regulations, CbCR requirements apply to MNE Groups headquartered in the UAE with consolidated Group revenue equal to or above AED 3.15 billion (approximately EUR 750 million) during the Fiscal Year immediately preceding the reporting Fiscal Year.
CbCR Filing Requirements in the UAE
If the threshold limit is met, the Ultimate Parent Entity is required to submit a CbCR notification in respect of each reporting Fiscal Year.
The CbCR notification needs to be submitted no later than the last day of the Fiscal Year and it informs the FTA that the Ultimate Parent Entity is the reporting Entity which will file the CbCR.
The Ultimate Parent Entity is also required to file the CbCR no later than 12 months after the last day of each reporting year of the MNE Group in the UAE. Taxable Persons can consult with the best transfer pricing advisers in Dubai to submit the CbCR as per the norms.
Key Components of the CbCR in the UAE
The UAE introduced CbCR requirements through Cabinet Resolution No.44 of 2020. As per Cabinet Resolution No. 44 of 2020, the form of a CbCR follows the Standard Template prescribed in the OECD Transfer Pricing Guidelines. Specifically, a CbCR includes the following three tables:
- Table 1 – Contains the quantitative information per tax jurisdiction such as unrelated party and related party revenues, stated capital, taxes accrued and paid, employee count, etc.
- Table 2 – Contains the qualitative information per Constituent Company on the main business activities undertaken during the year.
- Table 3 – Contains additional information necessary to facilitate the understanding of Tables 1 and 2 (for example, assumptions on exchange rates, source of data, etc.)
Hire the Best Transfer Pricing Documentation Services in the UAE
The OECD’s Three-Tiered Approach, encompassing CbCR, Master Files, and Local Files, serves as a foundational framework to enhance transparency and consistency in transfer pricing practices. These documentation pillars empower tax authorities to assess the fairness of intercompany transactions, prevent profit shifting, and ensure that multinational enterprises pay their fair share of taxes in each jurisdiction. Transfer pricing advisers in Dubai such as Tax Gian, a brand of Jitendra Tax Consultants (JTC), provide reliable transfer pricing documentation assistance for businesses.
Tax Gian’s team of tax experts in Dubai offers top-notch corporate tax advice for all businesses. Since 2001, Jitendra Chartered Accountants, an associate of JTC, has been providing end-to-end advisory services including tax solutions in Dubai, UAE to its clients globally. Avail of our tax advisory services in Dubai to ensure seamless compliance.