A corporate tax regime without transfer pricing provisions would be spineless. Transfer pricing is detailed and mention in the Federal Decree released on 9 December 2022. While we are undertaking detailed research on transfer pricing law in the UAE, here is our first take on the transfer pricing law in the UAE.
- TP Regulation to apply to UAE
Mainland as well as Free Zones.
- A Qualified Free Zone can
continue to be qualified for 0% corporate taxes if it meets transfer
pricing regulations and documentation. This means that without appropriate
TP, a Free Zone can lose benefits.
- Arm's Length Principle (ALP)
finds its place in the UAE Tax Decree.
- 5 methods to benchmark
transactions with Related Parties prescribed that are in line with the
global approach
- 6th method available, where
none of the above methods could be used to derive arm's length results
- Choice of method depends on
Contractual terms, Characterisation, Economic Circumstances, FAR analysis
and Business Strategies
- The Most Appropriate Method
(best suitable) concept used rather than Most Preferred Methods
(hierarchy)
- The corresponding adjustment
concept is brought in if a foreign tax administration makes adjustments to
the ALP of the taxpayer.
- The concept of Associated
Enterprises is subsumed by Related Parties with the threshold of 50% (In
India - 26%)
- TP Documentation provisions
are brought in, with 30 days provided for submission to tax authorities
when called for
- Concept of Master File and
Local file - thresholds to be declared
- The provision for the
Transfer Pricing Disclosure form has been brought in (Similar to Form 3CEB
- Transfer Pricing certificate)
- The ability to determine or
exercise significant influence over the conduct of the Business and
affairs is also covered in Related Parties
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