Transfer Pricing UAE

Frequently Asked Questions

Transfer pricing regulations aim to make sure that business dealings between Related Parties are conducted on arm’s length basis, as if they were between two independent parties. Several sections in the corporate tax law mandate that the consideration of transactions involving Related Parties and Connected Persons must be determined by reference to their “Market Value” in order to avoid the fabrication of taxable income.

Yes, Regardless of whether Related Parties or Connected Persons are situated on the UAE mainland, in a Free Zone, or in another country, transfer pricing regulations apply to UAE businesses that engage in transactions with them.

A person shall be regarded as “connected” to a company covered by UAE CT if they are:
  • The company’s owner;
  • A company official or director; or
  • One of the aforementioned Related Parties.

Any other businesses in which the company, alone or jointly with its Related Parties, has a dominant ownership stake (usually 50% or more of the firm’s shares) or that have more than 50% common ownership are referred to as Related Parties of the company.

Taxpayers frequently need to utilize one or more of the following methods to determine the arm’s length values for transfer pricing purposes:

  1. The similar uncontrolled pricing strategy.
  2. The resale price strategy.
  3. The cost-plus strategy.
  4. The strategy of transactional net margin.
  5. The mechanism of transactional profit splitting.

Businesses will need to keep documents of their dealings with Related Parties and Connected Persons, and some may need to provide this data with their tax returns.

Businesses that qualify for small business assistance are exempt from the transfer price documentation requirements. A master file and a local file may be required for some firms to maintain.

Yes, For any transactions involving Related Parties and Connected Persons, the transfer pricing regulations will be in effect. The conditions of any loan acquired from (or given to) a Related Party or Connected Person must thus be reasonable (i.e., the interest rate, term, etc.).

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