Transfer Pricing UAE

Service Overview

At ABICO, we understand that dealing with the complexities of transfer pricing in the UAE can be challenging. That’s why we provide a comprehensive suite of services designed to simplify this intricate area and ensure your full compliance with UAE regulations. Transfer pricing refers to the set of regulations that determine the arm’s length prices for controlled transactions. This encompasses various exchanges, including goods, services, loans, and intangibles. The goal is to ensure that these transactions are conducted fairly and in alignment with market standards, following OECD principles. The transfer price should mirror an “open market” or “arm’s length” value to prevent companies from adjusting prices within their corporate group to reduce their overall tax obligations. This method is essential for combating profit shifting and maintaining the integrity of the tax base, especially as regulations continue to evolve in the UAE and other jurisdictions. Scope of Transfer Pricing Regulations in the UAE Transfer pricing regulations pertain to all transactions between related parties and associated entities, including: - Cross-Border and Domestic Transactions: These rules apply to both international and domestic transactions, including those involving entities in free zones. - Government Transactions: Transactions between different segments of government entities, whether mandated or non-mandated, fall under these regulations as well. - Exempt Entities: Businesses designated as exempt or those opting for small business relief must still comply with arm’s length standards for intercompany transactions. However, exempt entities are not obligated to prepare or maintain local and master files. Related Parties and Connected Persons Under UAE Corporate Tax Regime - Related Parties: According to the UAE corporate tax regime, related parties include any individuals or entities associated with a taxable person, as outlined in Article 35(1) of the Corporate Tax Law. Such relationships can stem from kinship, ownership, or control, regardless of whether the parties are residents of the UAE. Criteria include kinship or affiliation, ownership, and control. It also includes relationships pertaining to an individual and their permanent establishment, partners within an unincorporated partnership, and trustees/beneficiaries of trusts or foundations. - Connected Persons: Individuals who have a direct or indirect relationship with a taxable person through ownership, control, or family ties. Transactions with connected persons must meet the arm's length standard. - Controlled Transactions: Transactions between related parties or connected persons that are subject to transfer pricing regulations. - Arm's Length Price: The price that would have been agreed upon between independent parties under similar circumstances. Transfer Pricing Services at ABICO in Dubai - Transfer Pricing Assessment: Conducting a transfer pricing assessment is essential for ensuring adherence to tax regulations. This process involves a careful evaluation of transactions between related entities to confirm they are priced at arm’s length, reflecting terms that independent parties would accept. This not only promotes transparency and reduces tax risks but also allows businesses to proactively tackle potential issues, ensuring alignment with international standards. - Transfer Pricing Impact Assessment: A transfer pricing impact assessment assists businesses in understanding how new regulations may influence their operations and financial standing. Our comprehensive analysis includes identifying related party transactions, evaluating financial and operational impacts, and identifying risks and opportunities to develop an efficient, compliant transfer pricing model that fosters business growth. Transfer Pricing Documentation Requirements in the UAE - Transfer Pricing Disclosure Form: A requirement for UAE businesses that engage in related-party transactions exceeding certain thresholds. According to Article 55(1) of the Corporate Tax Law, all taxable entities involved in transactions with related or connected parties above a materiality threshold must submit this form alongside their corporate tax return, as mandated for compliance by the Federal Tax Authority (FTA). - Reporting Thresholds: 1. Aggregate Related-Party Transactions: Disclosure is necessary if the cumulative value of transactions with related entities exceeds AED 40 million. 2. Transactions by Category: Disclosure is required when the value of transactions in a specific category surpasses AED 4 million. 3. Connected Person Transactions: Any transaction exceeding AED 500,000 with a connected individual must be reported. Preparation of Transfer Pricing Documentation: In the UAE, companies with consolidated group revenues exceeding AED 3.15 billion or individual revenues above AED 200 million are obligated to prepare detailed documentation to demonstrate compliance with transfer pricing regulations: - Local File: Includes extensive details on specific intercompany transactions, covering transaction specifics, related party information, transfer pricing methodologies employed, and analysis confirming arm's-length pricing. This must be readily available for submission to UAE tax authorities upon request. - Master File: Provides a high-level overview of the multinational enterprise group's global business operations and transfer pricing policies. - Country-by-Country Report (CbCR): Required for large multinational enterprise groups to report key financial and tax indicators globally. Benchmarking for Transfer Pricing: Benchmarking involves comparing a company's intercompany transactions against similar agreements made between independent entities to establish a 'fair market price'. At ABICO, we employ cutting-edge software to carry out thorough benchmarking studies, enabling us to establish an 'arm's-length range' for your transactions, validate the effectiveness of existing pricing strategies, and ensure compliance with international transfer pricing standards.