Transfer Pricing Assessment is now a crucial component of corporate tax compliance for companies operating in the United Arab Emirates, thanks to the guidelines provided by UAE Government Law 47 of 2022. Taxpayers are guaranteed to abide by this policy through transfer pricing mechanisms. International standards require transactions between stakeholders to be conducted remotely. An overview of transfer pricing regulations in the United Arab Emirates, international tax compliance, and risk management tactics used by multinational enterprises (MNEs) will be discussed in this blog. 

Methods of Transfer Pricing 

• The price paid for a controlled good or service is compared to the price paid for a comparable uncontrolled good or service using the abbreviated uncontrolled price (CUP) approach. 
• Cost Plus Method (CPM): This approach calculates the fair price by deducting a profit margin from the expenses paid by the vendor or service provider to the company. 
• Return Rate Method (RPM): This approach calculates fair value by deducting a profit margin from the selling price of a good or service in a company. 
• The Transactional Net Margin Method (TNMM) compares the net income of the taxpayer with the net income of the management. People’s incomes are not comparable. 
• Profit distribution strategy: This strategy divides up profits or losses among the company’s management stakeholders based on how much each one contributes to the supply chain’s advantages. 

Transfer Pricing Documentations 

The process of processing data and information to support management work remotely is known as information transfer cost. It is important for the following reasons. 

• Show that throughput laws are followed to avoid fines. 
• Encourage risk management and tax planning. 
• Communication with tax authorities and approved corporate tax consultants.  

The language and exchange rate policies of different international trading businesses and local documents provide comprehensive information on exchange rates, ensuring efficient communication with tax authorities and taxpayers.  

Risk Management for Transfer Pricing 

Risks related to transfer pricing are identified and mitigated as part of transfer pricing risk management. The following tactics can be combined to achieve this: 

• Analyze cost-effectiveness to pinpoint hazards and create plans for risk reduction. 
• Respect OECD and UAE tax guidelines when it comes to transfer pricing plans and procedures. 
• Assemble current data to assist the extensive branch of business management. 
• Cooperate with tax authorities and certified tax preparers to adhere to exchange rate laws. 
• What impact does transfer pricing have on corporation taxation.  

Transactions across borders and intellectual property rights 

The area of Cross-Border Traffic and Intellectual Property (IP) Transfer is dedicated to calculating the price of transformation. Regarding the UAE, it is crucial to consider the following: 

• Two tax agreements that the UAE has with different nations could have an impact on the cost of transactions for cross-border trade. 
• Special transfer price regulations have been released by the UAE for the transfer of intellectual property (IP) between interested parties. 
• To provide guidelines on transfer pricing, the UAE accepts the OECD’s BEPS (Item Wear and Profit Shifting) Action 8-10 Guidelines. 

UAE Corporate Tax Compliance Plan 

• Carrying out a transfer pricing risk assessment to recognize any hazards and create mitigation plans. 
• Creating transfer pricing strategies and practices that adhere to UAE tax legislation and OECD norms. 
• Preserving current documentation on transfer pricing to bolster the controlled transactions’ arm’s length character. 
• Interacting with tax authorities and authorized tax professionals to guarantee adherence to transfer pricing laws. 

How can Corporate Tax Consultants help?  

The professionals knowledgeable about this new law are corporate tax consultants. They ensure that your company complies with all applicable laws and guidelines. It would be really advantageous for your company to hire one. There is nothing to worry about because all the intricacies are handled. ebs Chartered Accountants is a prominent company in Dubai offering excellent business tax services. Experts in this field make up the team. Corporate tax consultants in Dubai have received specialized training in accordance with the rules of the UAE, and you will receive information on all procedures, including transfer pricing. You can utilize websites like uaetaxgpt.ae to find out more information. 

FAQs 

What are the requirements for TP in UAE? 

Taxable Persons must maintain contemporaneous TP documentation to demonstrate compliance with the TP rules and preserve their corporate tax integrity. The FTA expects that TP documentation be maintained either at the time of the transaction or when the Tax Return for that period is submitted. 

What is the transfer pricing form in UAE? 

This form ensures transparency and compliance with tax regulations by providing authorities with insight into the company’s transfer pricing practices. Tax authorities typically use these forms as a risk assessment tool to determine what taxpayers to audit. 

What is BEPS tax? 

Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately.