Page 20 - Focus Group

BEPS ACTION

PLAN 13

Technological developments and communication analysis of transfer pricing determination policy
revolution have contributed significantly to the and an annual Country by Country (CbC) Report.
growth of many countries by way of cross border In general, tax administration in one country may
trade, foreign direct investments, creation of not have access to the specific information on the
jobs and ultimately increase in the GDPs. This MNE group and may be unable to determine where
globalization and digitalization have also resulted the profits are reported for tax purposes. Country
into emergence of many Multinational Enterprises by Country Report is a part of transfer pricing
(MNEs). In this process of globalization many documentation requirement where the companies
MNEs have also adopted ways of minimizing their are going to provide information to the tax
tax burden by creating structures in no or low tax authorities about every country of their operations,
regimes, shifting profits, using deductible payment how much revenue generated, profits earned, tax
methods, and by benefiting from double taxation paid and accrued, number of employees, where the
treaties. This tax planning has resulted in loss of tax assets are located and variety of other information.
revenue for many governments. The Organization
for Economic Development and Co-operation The OECD has also developed a new analytical
(OECD) estimates that various governments lose database on individual multinationals and affiliates
anywhere between US$ 100 – US$ 240 Billion a year which provides detailed financial and quantitative
due to avoidance of tax by these MNEs who take information on individual Multinational Enterprises
advantages of tax rule gaps. and their global presence. Tax authorities who are
aggressively looking for tax revenue, will then share
In 2013, OECD and G20 countries developed an this information with the jurisdictions where the
action plan to address the Base Erosion and Profit
Shifting (BEPS) by Multinational Enterprises and Multinational Enterprise operates pursuant to the
tax treaties allowing tax authority to see the big
in 2015, adopted a 15-point action plan under the picture and global profile of the MNE.
BEPS project to address BEPS and enhance the
transparency. Action 13 is one of the Action Plans In May 2018, the UAE has joined the BEPS inclusive
which is about transfer pricing documentation framework and committed to implement four
where large MNEs are required to provide the tax BEPS minimum standards including County by
administration with a Master File containing the County Report. The UAE Government has further
high level information about their global business issued Regulation of the Submission of Reports
operations and transfer pricing policies, a Local File by Multi-national Companies under Cabinet
containing the detailed related party transactional Resolution no. 32 of 2019 in April. This resolution
transfer pricing documentation along with the is applicable for financial years beginning on or

20 TAX JOURNAL 2020 The Institute of Chartered Accountants of India (Dubai) Chapter NPIO