Expert UAE Transfer Pricing Solutions by TAG: UAE's Leading Tax Consultants & FTA Approved Tax Agency. Ensure Arm's Length Compliance, Meet Documentation Requirements, and Mitigate Risks.
Our Transfer Pricing Services
Transfer pricing refers to the prices set for transactions between related entities within a multinational enterprise (MNE). In the UAE, these transactions must comply with arm's length principles, ensuring that prices reflect those set between independent parties, as per OECD guidelines.
With the introduction of corporate tax, UAE businesses engaged in cross-border transactions must ensure compliance with transfer pricing regulations.
Arm's Length Price (ALP) and Its Importance
The Arm’s Length Price (ALP) is the price at which transactions should occur between related parties. The ALP ensures that businesses cannot manipulate prices to reduce taxable income. This principle is a cornerstone of the UAE's transfer pricing regulations.
Transfer Pricing for Services
Services exchanged between related entities can be categorized into:
- Low-Value Added Services (LVAS): Routine services with low complexity.
- High-Value Added Services (HVAS): Services like R&D or technical services with higher complexity and risk.
Key Factors Influencing Transfer Pricing
Transfer pricing decisions are affected by factors like:
- Contractual Terms: The terms defined between parties.
- Economic Conditions: Market dynamics that influence pricing.
- Risk and Intangibles: Risk assumption and contributions of intellectual property.
Who Are Related and Connected Parties?
Related parties are entities with common ownership, while connected persons include individuals or entities with significant control or familial ties to the business.
Impact of Transfer Pricing on UAE Corporate Tax
The UAE’s tax regulations require all intercompany transactions to follow arm’s length pricing. The Federal Tax Authority (FTA) monitors compliance and adjusts taxable income if necessary.
Transfer Pricing Documentation Requirements
Companies involved in cross-border transactions must maintain transfer pricing documentation, including:
- Master File: Global overview of the group’s structure.
- Local File: Local transactions with related parties.
- Country-by-Country Report (CbC): Global operations breakdown for groups with over AED 3.15 billion in revenue.
Documentation Conditions for Corporate Tax
Under Ministerial Decision No. 97 of 2023, businesses with transactions above AED 3.15 billion or revenue exceeding AED 200 million must prepare transfer pricing documentation.
Transfer Pricing Methods
Recognized methods for determining arm’s length pricing include:
- Resale Price Method (RPM)
- Cost-Plus Method (CPM)
- Comparable Uncontrolled Price Method (CUP)
- Transactional Net Margin Method (TNMM)
- Transactional Profit Split Method (TPSM)
How TAG Consultancy Can Help
TAG Consultancy specializes in Transfer Pricing and Corporate Tax Compliance. Our expert team assists businesses in UAE with documentation, choosing the right pricing methods, and ensuring compliance with local regulations.
If you need support with transfer pricing compliance in the UAE, TAG Consultancy is here to help. Our team offers tailored solutions to ensure full compliance with the UAE's transfer pricing laws.
