Qatar implements CbC legislation

Qatar implements CbC legislation

On 9 September 2018, Qatar published in its official gazette Ministry of Finance Decision No. 21, which implements country-by-country (CbC) reporting legislation. For financial years commencing on or after 1 January 2017, multinational enterprises (MNEs) with consolidated revenues of more than QAR 3 billion (approximately USD 830 million) that are headquartered in Qatar or that have Qatari constituent entities (i.e. subsidiaries, branches or permanent establishments) are subject to annual CbC reporting and/or notification requirements.

The implementation of the legislation follows Qatar becoming a member of the Inclusive Framework for the global implementation of the OECD/G20 BEPS project in November 2017 and signing the Multilateral Competent Authority Agreement on the exchange of Country-by-Country Reports in December 2017. All members of the inclusive framework must comply with four minimum standards, one of which relates to transfer pricing documentation under action 13.

What is a CbC report?

A CbC report contains aggregated information on a jurisdictional basis of an MNE’s revenues, profits, taxes, stated capital, accumulated earnings, employees and assets. The report also provides tax authorities with information on the locations and business activities of the MNE’s global operations. MNEs are expected to recognize key CbC reporting risk areas and be prepared to provide explanations of effective tax rates, if requested to do so by the tax authorities.

The CbC report will enable the Qatari tax authorities to assess high-level transfer pricing and other BEPS risks and also can be used for economical and statistical analysis.

The provisions of Decision No. 21 are broadly aligned with the CbC reporting requirements in other jurisdictions. Based on the wording of the decision, there are no major differences from the OECD CbC model legislation, although the CbC reporting threshold of QAR 3 billion equates to an amount slightly lower than the OECD’s suggested threshold of USD 850 million.

Implications for Qatari-headquartered MNEs

Qatari-headquartered MNEs may have been required to file a CbC report in another jurisdiction through a surrogate parent entity (SPE) for 2016. The CbC decision now requires MNEs with consolidated revenues of more than QAR 3 billion to submit a CbC report in Qatar, instead of the jurisdiction of the SPE. This may impact 2017 CbC notifications previously submitted to various competent authorities and may trigger an extra burden on taxpayers due to a potential requirement to resubmit CbC notifications based on local rules.

Although there is no specific guidance on the notification process, Qatari-headquartered MNEs will be required to notify the Qatari competent authority that they are the ultimate parent entity (UPE). Ordinarily, the notification would be required to be filed in advance of the financial year-end but for the financial year ended 31 December 2017 (FY17), the notification must be submitted before 31 December 2018, in line with the notification for FY18.

Implications for MNEs with constituent entities resident in Qatar

MNEs with consolidated revenues of more than QAR 3 billion and Qatari subsidiaries, branches or permanent establishments will be required to notify the Qatari competent authority of the identity and residence of the UPE or SPE, if applicable, before 31 December 2018 for both the FY17 and FY18 CbC reports. Future notifications should be made in advance of the relevant fiscal year end.