UAE’s Ministry of Finance (MoF) has introduced a new reporting system for multinational entities (MNEs) which will allow the authorities to stay updated with the performance of multinational organizations functioning in the country.
The new system of reporting has been introduced in accordance with UAE’s Cabinet Resolution no. 44 of 2020 to organize the reports submitted by the multinational’s companies (MNEs).
Commenting on the reporting mechanism and its importance to the UAE authorities, Younis Haji Al Khoori, Undersecretary of MoF, remarked that the new system will be a core element of the Base Erosion and Profit Shifting, (BEPS)’s Action 13.
The system will facilitate multinational firms to submit their country-by-country reporting (CbCR) easily and in a segregated manner with breakdowns of the multinational group’s global revenue, profit, accrued income tax and other financial numbers for each country in which the organization operates.
“Exchanging information between taxpayers and tax authorities with regards to where MNEs’ economic value is generated, where their profits are transferred, and where those profits’ taxes are paid globally, required greater efforts so as to lessen the gap in the lack of information exchanged. Therefore, CbCR reporting became a prerequisite to strengthen the exchange of information and provide tax authorities with an overview of MNEs’ economic activities and their global financial results.”
Multinationals groups operating in the UAE are expected to register in the ‘MNEs Notification and Reporting System’ before December 31, 2020.
Base Erosion and Profit Shifting (BEPS)
The UAE joined BEPS’s comprehensive framework in 2018, which is led by the Organization for Economic Co-operation and Development (OECD) and the G20.
BEPS aims to prevent tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax.