Name: KGRN Chartered Accountants
Brand: KGRN
SKU: KGRND1
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Why Transfer Pricing Documentation Matters: Best Practices For Businesses in UAE

For multinational companies in the UAE, maintaining proper transfer pricing documentation is crucial to remain compliant with tax regulations and stay away from its associated risks. To effectively navigate the complexities in the regulatory landscape, proper transfer pricing documentation helps minimize potential risks and supports overall business operations. This helps companies to effectively conduct tax audits and regulatory reviews.

Importance of Transfer Pricing Documentation

Transfer pricing has become a high-level focal point for tax authorities to accumulate tax revenue. To prevent MNE’s (Multinational Enterprises) from shifting profits to low tax jurisdictions, transfer pricing study will be conducted by the tax authorities. Transfer pricing study is performed to inspect the pricing of transactions between two or more associated entities, which is referred to as related-party transactions. Hence, MNE’s are required to take prudent measures to determine transfer prices

Transfer pricing documentation is a collection of transaction records maintained by multinational companies to justify the transfer pricing between two associated entities. These entities typically operate across different jurisdictions under the same corporate group. The primary goal of transfer pricing documentation is to demonstrate that the intercompany pricing for goods and services are based on the arm’s length principles.

Why Business in UAE Should Maintain Transfer Pricing Documentation

Here are some of the key objectives to maintain transfer pricing documentation:

Adherence To Tax Regulations: Ensure compliance with local and international tax regulations.

Minimize Disputes: Reduce the complexities and discrepancies in paying taxes through clear clarification of intercompany pricing

Strengthen Risk Control: Proper maintenance of transfer pricing records offers a structured approach to identify and manage risks.

Informed Decision-Making: Effective documentation helps to make strategic decisions and financial planning through valuable insights.

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Compliance With Arm’s Length Principle: Demonstrate that the pricing for related-party transactions aligns with fair market value standards

Promote Transparency: Builds trust and smooth relationships with the tax authorities through proactive disclosure

Alignment With Global Tax Framework: Promotes consistent compliance with regulations across jurisdictions in line with global tax framework.

Key Records Of Transfer Pricing Documentation

The group companies in UAE must have a comprehensive record of all their intercompany transactions from multiple jurisdictions. The core documents of the

Master File & Local File: A taxable person should prepare and maintain a master file and local file if they fall under any of the below criteria:

If the taxable person belongs to the MNE group and their consolidated revenue is 3.15 Billion or above.
The taxable person’s revenue is AED 200 Million or above for the relevant tax period.

Taxable persons who are a part of a UAE-headquartered group without any establishments outside the UAE need not maintain a master file.

Disclosure Forms – Related Parties: If the related party transactions of taxpayers amounts to AED 40 million, which is recorded in financial statements or calculated based on market value, then the taxpayer should prepare a Disclosure Form with the corporate tax return.

Individual reporting is required if the transaction exceeds AED 4 million as well as the AED 40 million threshold is met.

Disclosure Form – Connected Parties: All payments or benefits provided to the connected persons which reaches an aggregate value of AED 500,000 should be disclosed in a form. It is thoroughly reviewed from a corporate tax, transfer pricing and reward perspective based on the arm’s length principle.

Country-by-Country Reporting: In UAE, the CbCR is only applicable for MNE groups which are headquartered in UAE and their consolidated revenue is AED 3.15 million or above, during the preceding fiscal year to the reporting year.

How KGRN Chartered Accountants Can Help?

We help numerous multinational companies in preparing accurate intercompany transactions and staying compliant with transfer pricing rules. Here’s how we add value to businesses through our transfer pricing services.

Streamline Intercompany Transactions: Managing intercompany transactions of a multinational company requires in-depth examination and adherence to local standards and best practices. Our transfer pricing experts help businesses streamline these transactions by creating well-drafted inter company agreements promoting efficiency and consistency across the entities.

Global Regulatory Expertise: Our network of skilled professionals have an extensive knowledge in both local and international regulations. We help companies stay updated with transfer pricing rules to ensure full compliance with the latest regulations.

Comparability Analysis: Comparability analysis helps to determine transfer pricing using arm’s length principle by evaluating and comparing transactions between related parties and transactions between unrelated parties to ensure fair taxation, We identify and compare these transactions to support arm’s length pricing

Transfer Pricing Documentation: We help multinational companies to record all the transactions and ensure they adhere to arm’s length pricing. We prepare all the documents required for transfer pricing examination including master file, local file, disclosure form, and country-by-country report.

Compliance Support: We ensure full compliance with transfer pricing regulations and OECD guidelines. Contact us now!