UAE launches financial reporting system for multinational companies
Dubai: Ministry of Finance on Saturday announced the launch of a reporting system for multinational entitiess (MNEs).
The New MNE Notification and Reporting System is in accordance with UAE’s Cabinet Resolution no. 44 of 2020 to organize the reports submitted by the multinational’s companies.
The reporting system is a core element of the Base Erosion and Profit Shifting (BEPS)’s Action 13. The system enables big Multinational Groups to submit their country by country reporting (CbCR) separately and in an easier way, while providing a breakdown of the Multinational Group’s global revenue, profit, accrued income tax and other financial indices for each country in which the MNE group 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,” said Younis Haji Al Khoori, Undersecretary of Ministy of Finance
MoF began receiving notifications through the system since November 5, 2020; and MNEs must register in the ‘MNEs Notification and Reporting System’ before December 31, 2020.
The UAE joined base erosion and profit shifting’s (BEPS) 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.
The OECD has issued 15 Action Items to address the main areas where they feel companies have been most aggressively accomplishing this shifting of profit — addressing the digital economy, treaty abuse, transfer pricing documentation, and more. BEPS Action Item 13, in particular, aims to transform transfer pricing documentation, forcing multinational corporations to reconsider how transfer pricing details are reported to local tax authorities as well as worldwide with country-by-country reporting.