MNEs ‘need to gear up for new rules on financial reporting’

MANAMA: Multinational firms in Bahrain need to gear up for new rules on financial reporting, say experts.

The Country-by-Country (CbC) Reporting (CbCR) requirements that came in force from the start of the year require multinational entities (MNEs) with a consolidated revenue exceeding BD342 million to submit a CbC report and/or CbCR notification within 12 months of the financial year-end.

The first reporting year starts on January 1, 2021 so the first report will be due by end-December 2022.

The form and method for submitting the CbC reports and required notifications shall be determined by the Industry, Commerce and Tourism Ministry.

Affected entities will need to submit a CbCR notification before the last day of the fiscal year and submit the first CbC report 12 months after the last day of the fiscal year-end.

The government decision no. 28 of 2021 putting in place CbCR rules for MNE groups operating in Bahrain is part of a process that started in May 2018, when the kingdom became a member of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Inclusive Framework.

This signalled the kingdom’s commitment to align its laws and procedures with international standards to improve tax compliance and transparency.

Since then the country has adapted the OECD’s Inclusive Framework (IF), Economic Substance Regulations (ESR), Ultimate Beneficiary compliance, ratification of the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of CbCR.

As per the new rules, MNEs have to file a report providing financial information for each tax jurisdiction where the group has a presence, enabling tax authorities to assess high-level risks related to transfer pricing and BEPS.

Commenting on the changes, Jatin Karia, senior partner of Grant Thornton Bahrain, said: “The past two years have seen several notable changes to regulatory and compliance regulations in the kingdom, as part of a larger trend in the GCC that is bringing tax regimes closer in line with OECD practices.

“The updates will have a positive benefit beyond that of diversifying government revenue; establishing standards and practices around tax encourages organisations to bring the same approach to other parts of their businesses.”

Bahrain has initiated major reforms for expanding government revenues – concurrently bringing transparency, standardisation, documentation, and controls to its tax governance.

More than BD934m were generated by the Bahrain government during 2018-2020 from value-added tax (VAT), excise, customs duties and taxes in the oil and gas sector.

“The National Bureau for Revenue (NBR) has updated its website to include a new section covering excise tax – including a list of excise goods and a guideline for refunds and foreign tax relations – including details of BEPS, tax residency matters and exchange of information requests,” explained Grant Thornton senior manager Muhammad Naveed.

The expert added that the regulator has increased the frequency of VAT audits and reviews and to ensure compliance at the grassroot levels of the economy.

According to Mr Naveed, the Central Bank of Bahrain, as the regulator of the financial sector, is also seen monitoring businesses under its mandate, aimed at ensuring the adoption of the new requirements, specifically ESR and the new CbCR rules.

 

Source: https://www.gdnonline.com/Details/942646/MNEs-%E2%80%98need-to-gear-up-for-new-rules-on-financial-reporting%E2%80%99

 

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