Article 8 - Filing of Top-Up Tax Return and Safe Harbours

Article 8.1 Top-up Tax Return Filing

8.1.1 Each Constituent Entity, Joint Venture and JV Subsidiary located in the UAE shall file a Top-up Tax Return with the Federal Tax Authority. The return may be filed by either the Constituent Entity, Joint Venture or JV Subsidiary itself or by a Domestic Designated Filing Entity on its behalf.

8.1.2 The Top-up Tax Return shall be filed in the manner specified by the Federal Tax Authority no later than 15 months after the last day of the Reporting Fiscal Year or 18 months after the last day of the Reporting Fiscal Year that is the first Transition Year of any Constituent Entity of the MNE Group.

8.1.3 The Top-up Tax Return developed by the Federal Tax Authority shall require the equivalent information and reporting requirements set out in the Pillar Two Information Return. The Constituent Entities, Joint Ventures, JV Subsidiaries or Domestic Designated Filing Entity may choose to apply the simplified Jurisdictional reporting framework provided in the Pillar Two Information Return.

Article 8.2. Safe Harbours

8.2.1 Transitional CBCR Safe Harbour

8.2.1.1 During the Transition Period, at the election of the Filing Constituent Entity, and notwithstanding Article 5, the Jurisdictional Top-up Tax of the UAE shall be deemed to be zero for a Fiscal Year if:

(a) the MNE Group reports Total Revenue of less than EUR 10 million and Profit (Loss) before Income Tax of less than EUR 1 million in the UAE on its Qualified CbC Report for the Fiscal Year;

(b) the MNE Group has a Simplified Effective Tax Rate that is equal to or greater than the Transition Rate in the UAE for the Fiscal Year; or

(c) the MNE Group’s Profit (Loss) before Income Tax in the UAE is equal to or less than the Substance-based Income Exclusion amount as calculated under Articles 5.3 and 9.2, for entities reported in the UAE in the Country- by-Country Report.

8.2.1.2Article 8.2.1.1 shall apply to the Joint Venture and JV Subsidiaries as if they were Constituent Entities of a separate MNE Group, except that the Pillar Two Income or Loss and Total Revenue would be the ones reported in their Qualified Financial Statements.

8.2.1.3 The following adjustments shall be made for purposes of Article 8.2.1.1:

(a) where the Ultimate Parent Entity is a Flow-through Entity or subject to a Deductible Dividend Regime, the Profit (Loss) before Income Tax (and any associated taxes) of that Entity shall be reduced to the extent where such amount is attributable to or distributed as a result of an Ownership Interest held by a Qualified Person;

(b) a Net Unrealised Fair Value Loss shall be excluded from Profit (Loss) Before Income Tax if that loss exceeds EUR 50 million in the UAE;

(c) the Profit (Loss) before Income Tax, Total Revenue and Taxes of an Investment Entity shall be reflected only in the Jurisdictions of its direct Constituent Entity-owners in proportion to their Ownership Interest;

(d) in the case of a Hybrid Arbitrage Arrangement entered into after 15 December 2022:

i. excluding any expense or loss from the Profit (Loss) before Income Tax of the UAE arising from a Deduction Non-inclusion Arrangement or Duplicate Loss Arrangement; and

ii. excluding any income tax expense from the income tax expense of the Entities reported in the UAE arising from a Duplicate Tax Recognition Arrangement.

(e) the amount of uncertain tax positions shall be removed from the income tax expense; and

(f) where a loss arising in a Permanent Establishment is reflected in the Profit (Loss) before Income Tax of the Jurisdiction where the Permanent Establishment is reported and such loss is also reflected in the Profit (Loss) before Income Tax of the Jurisdiction of the head office or Main Entity, the amount of the loss shall be removed from the Profit (Loss) before Income Tax of the Jurisdiction of the head office or Main Entity;

(g) taxes that are not Covered Taxes shall be removed from the income tax expense;

(h) the amount of the income tax expense from taxes imposed on a Permanent Establishment by the Jurisdiction of the Permanent Establishment shall be allocated exclusively to that Jurisdiction;

8.2.1.4Article 8.2.1.1 shall not apply where:

(a) the UAE is the UPE Jurisdiction and the Ultimate Parent Entity is a Flow- through Entity unless all the Ownership Interests in the Ultimate Parent Entity are held by Qualified Persons;

(b) the Top-up Tax that may arise from Stateless Reverse Hybrid Entities subject to the provisions of this Decision;

(c) Multi-parented MNE Groups where a single Qualified CbC Report does not include the information of the combined groups;

(d) the Top-up Tax computation of Constituent Entities subject to the provisions of this Decision have not benefited from Article 8.2.1.1 or an equivalent foreign provision in a previous Fiscal Year in which the MNE Group is subject to the Pillar Two Rules, unless the MNE Group did not have any Constituent Entities in the UAE in the previous year; and

(e) the MNE Group uses data from different sources of Qualified Financial Statements for that same Entity or Permanent Establishment in the calculations required in Article 8.2.1.

8.2.1.5 Notwithstanding Article 2.3, Article 8.2.1.1 applies to the Top-up Tax of the Constituent Entities located in the UAE irrespective of whether an Investment Entity is reported in the UAE in the Country-by-Country Report.

8.2.1.6Article 8.2.1.1(a) does not apply where the Ultimate Parent Entity controls Entities located in the UAE that are not consolidated on a line-by-line basis because they are held for sale and the sum of the revenue of such Entities when combined with the Total Revenue in the UAE equals or exceeds EUR 10 million.

8.2.1.7 For purposes of Article 8.2.1.1(c), the Substance-based Income Exclusion shall not take into account the payroll and tangible assets of:

(a) Entities not reported in the UAE in the Country-by-Country Report;

(b) Excluded Entities; and

(c) Constituent Entities that are located in different Jurisdictions in accordance with this Decision and the Country-by-Country Report.

8.2.1.8 Where the MNE Group is not required to file a Qualified CBC Report, Article 8.2.1.1 may apply provided that the MNE Group includes in its Top-up Tax Return for the Fiscal Year the data from Qualified Financial Statements that would have been reported as Total Revenues and Profit (Loss) Before Income Tax in a Qualified CBC Report and such data is used for purposes of the calculations of pursuant to Article 8.2.1.1.

8.2.1.9 Amounts from intra-group transactions treated as income in the Qualified Financial Statements of the recipient and as an expense in the Qualified Financial Statements of the payer shall be included in Total Revenues and Profit (Loss) Before Tax for the purpose of the computations in Article 8.2.1.1 without further adjustments, irrespective of the treatment of these transactions for tax purposes in the Jurisdiction of the recipient or the payer or in the Country-by-Country Report.

8.2.1.10 Where the financial statements used to prepare the Country-by-Country Report contains assets that were valued based on purchase price allocation due to the acquisition of a Controlling Interest as a result of a business combination, the Country-by-Country Report will be considered to be prepared and filed using Qualified Financial Statements provided that:

(a) the MNE Group has not submitted a Country-by-Country Report for a Fiscal Year beginning after 31 December 2022 that was based on the Constituent Entity’s reporting package or separate financial statements without the purchase price allocation adjustments, except where the Constituent Entity was required by law or regulation to change its reporting package or separate financial statements to include purchase price allocation adjustments; and

(b) any reduction to the Constituent Entity’s income attributable to an impairment of goodwill related to transactions entered into after 30 November 2021 must be added back to the Profit (Loss) before Income Tax:

i. for purposes of applying the test in Article 8.2.1.1(c); and

ii. for purposes of applying the test in Article 8.2.1.1(b), but only if the financial accounts do not also have a reversal of deferred tax liability or recognition or increase of a deferred tax asset in respect of the impairment of goodwill.

8.2.1.11 For purposes of the provisions in Article 8.2.1:

(a) Deduction Non-inclusion Arrangement means an arrangement under which one Constituent Entity directly or indirectly provides credit or otherwise makes an investment in another Constituent Entity that results in an expense or loss in the financial statements of a Constituent Entity to the extent that:

i. there is no commensurate increase in the revenue or gain in the financial statements of the Constituent Entity counterparty; or

ii. the Constituent Entity counterparty is not reasonably expected over the life of the arrangement to have a commensurate increase in its taxable income. An arrangement will not be a Deduction Non-inclusion Arrangement to the extent that the relevant expense or loss is solely with respect to Additional Tier One Capital.

(b) Duplicate Loss Arrangement means an arrangement that results in an expense or loss being included in the financial statement of a Constituent Entity to the extent that:

i. the expense or loss is also being included as an expense or loss in the financial statement of another Constituent Entity; or

ii. the arrangement also gives rise to a duplicate amount that is deductible for purposes of determining the taxable income of another Constituent Entity in another Jurisdiction.

(c) Duplicate Tax Recognition Arrangement means an arrangement that results in more than one Constituent Entity including part or all of the same income tax expense in its:

i. Adjusted Covered Taxes; or

ii. Simplified Effective Tax Rate for the purposes of applying the Transitional CbCR Safe Harbour; unless such arrangement also results in the income subject to the tax being included in the relevant financial statements of each such Constituent Entity. An arrangement will not be a Duplicate Tax Recognition Arrangement if it arises solely because the Simplified Effective Tax Rate of a Constituent Entity does not require adjustments for income tax expenses which would be allocated to another Constituent Entity in determining the first Constituent Entity’s Adjusted Covered Taxes.

(d) Hybrid Arbitrage Arrangement means a:

i. Deduction Non-inclusion Arrangement

ii. Duplicate Loss Arrangement; or

iii. Duplicate Tax Recognition Arrangement.

(e) Net Unrealised Fair Value Loss means the sum of all losses, as reduced by any gains, which arise from changes in the fair value of Ownership Interests (except for Portfolio Shareholdings).

(f) Profit (Loss) Before Income Tax means an MNE Group’s Profit (Loss) Before Income Tax in a Jurisdiction as reported on its Qualified CbC Report.

(g) Qualified Financial Statements means:

i. the accounts used to prepare the Consolidated Financial Statements of the Ultimate Parent Entity;

ii. separate financial statements of each Constituent Entity provided they are prepared in accordance with either an Acceptable Financial Accounting Standard or an Authorised Financial Accounting Standard if the information contained in such statements is maintained based on that accounting standard and it is reliable; or

iii. in the case of a Constituent Entity that is not included in the Consolidated Financial Statements of the Ultimate Parent Entity on a line-by-line basis solely due to size or materiality grounds, the financial accounts of that Constituent Entity that are used for preparation of the MNE Group’s Country-by-Country Report.

(h) Qualified CbC Report means a Country-by-Country Report prepared and filed using Qualified Financial Statements irrespective whether different Qualified Financial Statements are used for different Jurisdictions tested under Article 8.2.1.1.

(i) Qualified Person means

i. in respect of an Ultimate Parent Entity that is a Flow-through Entity, a holder described in Article 7.1.1(a) to (c); and

ii. in respect of an Ultimate Parent Entity that is subject to Deductible Dividend Regime, a holder described in Article 7.2.1(a) to (c).

(j) Total Revenue means an MNE Group’s Total Revenues in a Jurisdiction as reported on its Qualified CbC Report.

(k) Simplified Covered Taxes means a Jurisdiction’s income tax expense as reported in the MNE Group’s Qualified Financial Statements after any adjustment required by Article 8.2.1.

(l) Simplified Effective Tax Rate means the effective tax rate calculated by dividing the Jurisdiction’s Simplified Covered Taxes by its Profit (Loss) Before Income Tax as reported on the MNE Group’s Qualified CbC Report.

(m) Transition Period means the period that covers all of the Fiscal Years that begin before 1 January 2027 and end before 1 July 2028.

(n) Transition Rate means:

i. 16% for Fiscal Years beginning in 2025;

ii. 17% for Fiscal Years beginning in 2026.

8.2.2 Simplified Calculations Safe Harbour

8.2.2.1 At the election of the Filing Constituent Entity, and notwithstanding Article 5, the Top-up Tax (other than Additional Current Top-up Tax) for the UAE shall be deemed to be zero for a Fiscal Year provided that the MNE Group meets one of the following tests with respect to its operations in the UAE:

(a) Routine Profits Test;

(b) De Minimis Test; or

(c) Effective Tax Rate Test.

8.2.2.2 A Constituent Entity may use a Simplified Income Calculation, Simplified Revenue Calculation, or a Simplified Tax Calculation for the purposes of determining whether any of the tests in Article 8.2.2.1 are met in the Fiscal Year. The Simplified Income Calculation, Simplified Revenue Calculation and Simplified Tax Calculation of Constituent Entities shall be combined with the Pillar Two computations of Constituent Entities that do not meet the definition of Non-material Constituent Entities in Article 8.2.2.7 to determine whether the UAE meets any of the tests in Article 8.2.2.3.

8.2.2.3 An MNE Groups meets:

(a) the Routine Profits Test if its Pillar Two Income in the UAE as determined under the Simplified Income Calculation is equal or less than the amount that results from computing the Substance-based Income Exclusion for the UAE in accordance with Article 5.3;

(b) the De Minimis Test if the Average Pillar Two Revenue in the UAE as determined under the Simplified Revenue Calculation is less than EUR 10 million, and the Average Pillar Two Income in the UAE is less than EUR 1 million or has a loss as determined under the Simplified Income Calculation in accordance with Article 5.5; or

(c) the Effective Tax Rate Test if the Effective Tax Rate of the UAE as determined under the Simplified Income Calculation and the Simplified Tax Calculation, is at least 15% as determined in accordance with Article 5.1.1.

8.2.2.4 The Simplified Revenue Calculation includes the following calculations:

(a) a Filing Constituent Entity may make an Annual Election so the Pillar Two Revenue of a Non-Material Constituent Entity is equal to the Total Revenue of the Non-Material Constituent Entity as determined in accordance with the Relevant CBC Regulations.

8.2.2.5 The Simplified Income Calculation includes the following calculations: (a) a Filing Constituent Entity may make an Annual Election so the Pillar Two Income or Loss of a Non-Material Constituent Entity is equal to the Total Revenue of the Non-Material Constituent Entity as determined in accordance with the Relevant CBC Regulations.

8.2.2.6 The Simplified Tax Calculation includes the following calculations:

(a) a Filing Constituent Entity may make an Annual Election so the Adjusted Covered Taxes of a Non-Material Constituent Entity is equal to Income Tax Accrued (current year) of the Non-Material Constituent Entity as determined in accordance with the Relevant CBC Regulations.

8.2.2.7 For purposes of the provisions in Article 8.2.2:

(a) Non-material Constituent Entity means an Entity, including its Permanent Establishments, that is not consolidated on a line-by-line basis in the Consolidated Financial Statements of the Ultimate Parent Entity solely on size or materiality grounds and is considered a Constituent Entity in accordance with Article 1.2.2, provided that:

i. the Consolidated Financial Statements are those that are described in paragraphs (a) or (c) of the definition provided under Article 18.1;

ii. the Consolidated Financial Statements are externally audited; and

iii. in the case of an Entity with a Total Revenue that exceeds EUR 50 million, its financial accounts that are used to complete the CbC Report are prepared in accordance with an Acceptable Financial Accounting Standard or an Authorised Financial Accounting Standard.

(b) Relevant CbC Regulations means the Country-by-Country Reporting regulations of the UPE Jurisdiction or of the surrogate parent entity Jurisdiction if a Country-by-Country Report is not filed in the UPE Jurisdiction. If the UPE Jurisdiction does not have Country-by-Country Report legislation and an MNE Group is not required to file a Country- by-Country Report in any Jurisdiction, Relevant CbC Regulations shall mean the OECD BEPS Action 13 Final Report and the OECD Guidance on the Implementation of Country-by-Country Reporting.

8.2.3 Disapplication of a Safe Harbour

8.2.3.1 An election made under the provisions of Article 8.2 shall not apply in circumstances where:

(a) Top-up Tax could be charged under the provisions of this Decision if the Effective Tax Rate for the UAE computed in accordance with Article 5 was below the Minimum Rate; and

(b) the Federal Tax Authority notifies the Liable Constituent Entity (or Entities) within 36 months after the filing of the Top-up Tax Return of specific facts and circumstances that may have materially affected the eligibility of the Constituent Entities located in the UAE for the relevant safe harbour and invites the Liable Constituent Entity (or Entities) to clarify within six months the effect of those facts and circumstances on the eligibility of those Constituent Entities for that safe harbour; and

(c) the Liable Constituent Entity (or Entities) fail(s) to demonstrate within the response period that those facts and circumstances did not materially affect the eligibility of the Constituent Entities for the relevant safe harbour.

8.2.3.2 For purposes of Article 8.2.3.1(b), the Federal Tax Authority may notify some of the Liable Constituent Entities instead of all of the Liable Constituent Entities in cases where it is difficult, under particular circumstances, to notify all the Liable Constituent Entities.