Transfer pricing is an important part of UAE Corporate Tax compliance for businesses that transact with Related Parties or Connected Persons. A structured approach helps a business explain how prices were determined and whether those terms are consistent with the arm’s length principle.
What is transfer pricing?
Transfer pricing refers to the pricing of transactions between parties that have a defined relationship. These transactions may include goods, services, financing, intellectual property arrangements or management support.
The objective is to consider whether the terms are comparable to those that independent parties would agree in similar circumstances.
Which transactions should businesses review?
- Sales or purchases between related entities
- Management, technical or administrative service charges
- Loans, guarantees and other financing arrangements
- Royalties, licences and intellectual property transactions
- Payments or benefits involving Connected Persons
Why documentation matters
Contemporaneous records help explain the nature of a transaction, the parties involved, the pricing method used and the commercial basis for the arrangement. Documentation requirements vary according to the facts and applicable conditions, so businesses should not assume that every file or disclosure requirement applies in the same way.
A practical preparation process
- Identify Related Parties and Connected Persons.
- Map transactions and agreements with those parties.
- Review the functions performed, assets used and risks assumed.
- Select and support an appropriate pricing method.
- Maintain the analysis and supporting records for the relevant period.
Official UAE guidance
The Federal Tax Authority Transfer Pricing Guide provides technical guidance on the UAE rules and documentation framework.
Transfer Pricing support from Business Catalyst
Business Catalyst provides Transfer Pricing Services UAE to help businesses review related-party transactions, develop policies and prepare appropriate documentation.
This article provides general information only. Transfer pricing obligations should be assessed using the facts of each business and transaction.