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Transfer Pricing In The Uae – Are

We Prepared?

CA Nandita Salgaonkar application of one of the methods stated in the OECD
Transfer Pricing Guidelines.

A global transfer pricing policy document can help
A. Transfer Pricing Provisions in layman terms Transfer demonstrate transparency and uniformity of the transfer
Pricing Provisions are a set of mechanisms to ensure pricing policies applied for various transactions across
that intra-group transactions are conducted at arm’s jurisdictions. Intercompany agreements are useful
length i.e., the price would be same as that charged to document the intra-group terms and conditions.
by independent third party in an uncontrolled situation. In case of free-of-cost intra-group transactions, the
Both the taxpayers as well as the tax authorities pay MNCs may have to evaluate whether the same meet
significant attention to the transfer pricing policies as: the arm’s length criteria or there is a requirement to
1. taxpayers would always like to structure their intra- set up transfer price. For the service transactions,
group transactions in a way that their cash outflow it is always advisable to keep mail correspondence/
in the form of tax is minimal; 2. on the other hand, other documents to demonstrate need and receipt of
tax authorities would want to ensure that there is services. The MNCs may consider either using excel
no tax avoidance in their jurisdiction. An adequately or having appropriate modifications in the existing ERP
documented transfer pricing policies ensure that the software to implement the intra-group transfer pricing
intra-group transactions are at arm’s length and thus, in at the time of pricing/invoicing.
turn help in tax transparency.
The UAE headquartered MNEs are already required to
B. How do the UAE based MNCs be ready from transfer comply with Country-by-Country Reporting regulations
pricing perspective? Foremostly, it is important to in the UAE. The Public Consultation Document for
identify the intra-group transactions that fall under the Corporate Tax states that local file and master file (as
purview of transfer pricing (as per Public Consultation per OECD prescribed format) along with the reporting
Document). For such transactions, it is advisable to of the intra-group transactions may also be required.
have a transfer pricing benchmarking study in place to Maintaining documents as mentioned above eases the
document the functions performed, assets employed preparation of local file and master file.
and risks assumed and to evaluate the arm’s length by

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