Understanding UAE Transfer Pricing Documentation Requirements

For businesses in the UAE, it is essential to navigate the complexities of transfer pricing documentation in order to comply with regulations and optimize their tax positions. The introduction of the UAE Corporate Tax Law has made it more crucial than ever to understand the specific documentation requirements. In this guide, we explore the key elements of transfer pricing documentation in the UAE, clarifying obligations, thresholds, and recommended practices.

What Constitutes Transfer Pricing Documentation in the UAE?

Transfer pricing documentation encompasses the records and analyses that companies are required to keep in order to show that their dealings with related parties occur at arm’s length—specifically, in line with the pricing that would take place between independent entities under comparable conditions.

In the UAE, the Federal Tax Authority (FTA) mandates specific documentation to ensure transparency and compliance:

Transfer Pricing Disclosure Form (TPDF): A summary of related party transactions submitted alongside the corporate tax return.
Master File: Provides an overview of the multinational enterprise (MNE) group’s global business operations and transfer pricing policies.
Local File: Contains detailed information on the local entity’s intercompany transactions, including functional and economic analyses.
Country-by-Country Report (CbCR): For MNEs with consolidated revenues exceeding AED 3.15 billion, detailing global allocation of income, taxes, and business activities.

These documents are essential for the FTA to assess whether intercompany transactions comply with the arm’s length principle.

Who Is Required to Prepare Transfer Pricing Documentation?

Under the UAE Corporate Tax Law, the obligation to maintain transfer pricing documentation applies to taxable persons engaging in transactions with related parties or connected persons. Specifically:

Transfer Pricing Disclosure Form (TPDF): All taxable persons with related party transactions during the tax period must submit the TPDF with their corporate tax return.
Master File and Local File: Required if the taxable person meets either of the following conditions:
- Is a constituent entity of an MNE group with consolidated revenues exceeding AED 3.15 billion during the relevant tax period.
- Has revenues exceeding AED 200 million during the relevant tax period.
Country-by-Country Report (CbCR): Applicable to MNE groups with consolidated revenues exceeding AED 3.15 billion during the fiscal year immediately preceding the reporting fiscal year.

Even if a business is exempt from corporate tax or qualifies for small business relief, it may still need to adhere to transfer pricing documentation requirements if it meets the specified thresholds. This is an important consideration.

What Should Be Included in the Master File and Local File?

Master File:

The Master File provides a high-level overview of the MNE group’s global operations and transfer pricing policies. Key components include:

Organizational structure of the MNE group.
Description of the MNE group’s business activities.
Details of the group’s intangibles, intercompany financial activities, and financial and tax positions.

Local File:

The Local File focuses on the local entity’s intercompany transactions. It should contain:

Detailed descriptions of material intercompany transactions.
Functional analysis of the local entity and its related parties.
Economic analysis supporting the arm’s length nature of the transactions.
Financial information of the local entity.

Both files must be prepared contemporaneously and submitted to the FTA upon request, typically within 30 days.

What Transactions Must Be Documented in the Local File?

The Local File should include transactions with:

Non-resident related parties.
Exempt persons under the Corporate Tax Law.
UAE resident persons who have elected for small business relief.
UAE resident persons subject to a different corporate tax rate.

However, transactions with the following parties are generally excluded:

UAE resident persons not falling into the above categories.
Natural persons acting independently.
Juridical persons considered related solely due to partnership in an unincorporated partnership, acting independently.
Permanent establishments of non-UAE entities subject to the same corporate tax rate as the local entity.

It’s crucial to assess each transaction to determine its inclusion in the Local File accurately.

How Can Kinanis UAE Assist You?

At Kinanis UAE, we specialize in helping businesses navigate the complexities of transfer pricing documentation. Our services include:

Comprehensive Analysis: Evaluating your intercompany transactions to ensure compliance with the arm’s length principle.
Documentation Preparation: Assisting in the preparation of TPDFs, Master Files, Local Files, and CbCRs.
Strategic Advisory: Providing insights to optimize your transfer pricing strategies and mitigate risks.

Our team of experts is dedicated to ensuring your business remains compliant and thrives in the evolving tax landscape.

Ready to Ensure Compliance with UAE Transfer Pricing Documentation Requirements?

Don’t allow the complexities of transfer pricing documentation to impede your business development. Contact Kinanis UAE today for expert advice customized to your needs.