Transfer Pricing in Dubai, UAE
Transfer pricing is the pricing of goods, services, or intangible assets transferred between related parties, such as affiliates or subsidiaries of a multinational company. The UAE Corporate Tax Law enforces transfer pricing regulations and documentation requirements to ensure that the pricing of transactions between related entities complies with the arm’s length principle.
Transfer pricing is crucial because it ensures that business dealings between related parties are carried out at arm’s length, which means that the prices are the same as they would be if the parties were not linked. This stops MNCs from moving earnings to countries with low taxes and guarantees that the UAE gets its fair share of tax money.
Who is subject to transfer pricing rules in Dubai?
All taxpayers who engage in transactions with related parties are subject to the UAE transfer pricing rules, regardless of their size or industry. However, some exemptions and simplified rules are in place for small and medium-sized enterprises. Transfer pricing consultants in Dubai can help you understand more about them.
Different transfer pricing methods
The most common methods are:
- Comparable uncontrolled price (CUP) method: This method involves comparing the price of the transaction in question to the price of similar transactions between unrelated parties.
- Cost plus method: This method involves adding a markup to the cost of the goods or services being transferred.
- Resale minus method: This method involves subtracting a markup from the resale price of the goods or services being transferred.
- Profit split method: This method allocates the profits from a transaction between related parties based on a predetermined formula.
The best transfer pricing method to use will depend on the specific facts and circumstances of the transaction.
What are the transfer pricing documentation requirements in the UAE?
Taxpayers who are subject to the UAE transfer pricing rules are required to maintain certain documentation. This documentation must be sufficient to demonstrate that the taxpayer’s transfer pricing arrangements are at arm’s length. Seeking a trusted transfer pricing consultant can assist you in getting all the necessary documentation in order. The required documentation includes:
- A master file: This file must contain general information about the taxpayer’s business, its related parties, and its transfer pricing arrangements.
- A local file: This file must contain more detailed information about the taxpayer’s transfer pricing arrangements, including the transfer pricing methods used and the supporting documentation.
Penalties may apply to taxpayers who fail to keep track of the necessary records.
How can we assist?
Our team of knowledgeable transfer price specialists at TRCPamco can assist you in adhering to the UAE transfer pricing regulations. We can assist you with:
- Developing and implementing a transfer pricing policy
- Choosing the appropriate transfer pricing method
- Preparing the required transfer pricing documentation
- Defending your transfer pricing arrangements in the event of a tax audit
We are prepared to assist you at every stage since we recognize that transfer pricing can be a challenging subject. For more information on our UAE transfer pricing services, contact our experts today!
