Transfer Pricing Services in UAE | Compliance & Advisory

Streamline Business Transactions with Transfer Pricing Advisory in the UAE

The UAE has introduced transfer pricing based on the Organisation for Economic Co-operation and Development (OECD) principles to promote fair taxation and prevent profit shifting among multinational corporations. This has added a new layer of complexity in corporate tax and is now a crucial element for businesses with cross-border transactions.

Transfer pricing refers to the pricing of goods, services, IPs and financial transactions & other transactions between related entities within a multinational group. It determines the arm’s length prices, which means they must be priced as if they were between independent entities operating in similar market conditions. This prevents companies from adjusting prices within their corporate group to reduce their overall tax obligations.

Our experts have expertise in Transfer Pricing regulations in the UAE and can help you understand the tax structure for inter-company and cross-border transactions. We provide a comprehensive suite of services to ensure that your company fulfils all the Transfer Pricing requirements.

Are the UAE Transfer Pricing Rules Applicable to You?

Transfer pricing regulations apply to all transactions between related parties or associated entities within the UAE or across borders, including:

• Cross-Border and Domestic Transactions: Transfer pricing rules apply to both international and domestic transactions, including entities in free zones.
• Government Transactions: Transactions between different segments of government entities.
• Exempt Entities: Businesses that qualify for the UAE’s Small Business Relief or standalone entities are exempt from Transfer Pricing documentation, but must still comply with arm’s length standards for intercompany transactions.

Transfer Pricing Methods in the UAE

There are various transfer pricing methods used to fix arm’s length price. Businesses need to select the most appropriate method for them based on data availability, actual business model, value chain analysis and industry standards.

Traditional Transaction Methods

• Comparable Uncontrolled Price (CUP) Method: This compares the price of a controlled transaction with that of a similar transaction between independent entities.
• Resale Price Method (RPM): This determines the transfer price for goods or services based on the resale price adjusted by deducting the gross margin, including additional costs associated with the purchase of the goods or services.
• Cost Plus Method (CPM): This calculates pricing by adding the gross profit margin to the cost of production or services provided.

Transactional Profit Methods

• Transactional Profit Split Method (TPSM): This allocates profits amongst the associated parties based on the relative value and function each party contributed towards the profit.
• Transactional Net Margin Method (TNMM): This is one of the most used methods of transfer pricing. It compares and tests the net profit margins of a controlled transaction with those of independent entities engaged in similar business activities.

What Challenges Can You Face in Transfer Pricing?

Compliance

Transfer pricing regulations and cross-border transactions can be a complex territory when translated into tax structures. If not filed accurately, some companies can unknowingly fall under tax evasion and be charged with serious penalties for non-compliance.

Selecting the transfer pricing method

Selecting the most appropriate method for transfer pricing for your related party transactions s can be a daunting task.

Accurate Comparability

Identifying appropriate comparable to determine arm’s length for transfer pricing can be a complex and time-consuming process.

Economic Justification

Justifying transfer pricing methods to authorities requires sound economic analysis and robust documentation.

Industry Relevance

Benchmarking analysis for transfer pricing needs to be relevant to your company’s industry and highlight industry-specific practices and access to transfer pricing comparable databases.

Evolving Regimes

The tax regimes in the UAE are constantly evolving, and keeping up with modifications requires extra attention and expertise.

Our Suite of Transfer Pricing Services

We offer end-to-end solutions for transfer pricing that help you remain compliant with the latest regulations in the UAE.

Transfer Pricing Assessment

This assessment involves the evaluation of intra-group transactions between related entities to verify that they are priced at arm’s length and reflective of OECD & regulatory standards. This promotes transparency, reduces tax inaccuracies and ensures alignment with compliance regulations. Our comprehensive assessment includes:

Our comprehensive assessment includes:

Verifying Transactions: We verify all entity transactions to assess their compliance with transfer pricing regulations.
Comparable Analysis: We identify comparable transactions and entities to establish an arm’s length range. We conduct in-depth analysis to identify the most appropriate transfer pricing method for your business.
Benchmarking: We leverage our industry expertise and global databases to ensure accurate benchmarking.

Transfer Pricing Documentation

Our experts assist in preparing detailed and robust transfer pricing documentation to support compliance and tax audits. These documents include:

OECD-mandated master files that contain information about all the members of the Multinational Entity (MNE) group
Local files containing data about all the local entities and industry, FAR and economic analysis.
Country-by-country reports that contain data about the allocation of income and taxes globally for the concerned entity

Transfer Pricing Risk Assessment

We examine the potential financial and operational impact of transfer pricing on your business. We identify opportunities for improvement for a more efficient and compliant pricing model.

Transfer Pricing Compliance

We offer continuous support to comply with transfer pricing regulations in UAE and globally, including document filings, disclosures and reports.

Why Choose Stratrich for Pricing Transfer Advisory?

Expertise Across Jurisdictions – With a deep understanding of the UAE corporate tax law, Stratrich provides guidance that aligns with both local and international transfer pricing regulations.
Tailored Transfer Pricing Solutions – Our corporate tax experts work closely with you to design optimum transfer pricing solutions that help you fix related party pricing, ensure compliance, and support required documentation.
Proactive Transfer Pricing Planning – Our team helps in planning the arm’s length price so that you can fix it in advance—before undertaking the related party transaction.
Commitment to Compliance and Accuracy – We ensure accurate filings and timely submissions, protecting your business from costly penalties. Our rigorous approach to detail and compliance gives you peace of mind, knowing that every aspect of your transfer pricing obligations is managed professionally.
Ongoing Support and Transparency – You’ll receive regular updates and clear communication, ensuring you’re fully informed at every stage.

Frequently Asked Questions (FAQs)

The Arm’s Length Principle is the internationally recognised standard for Transfer Pricing. It requires that transactions between Related Parties be conducted as if they were between independent parties under similar circumstances.

Transfer Pricing Disclosure Form – Summary of intercompany transactions conducted during a tax period
Master File – Overview of business operations, revenue distribution, and economic activities within a multinational group
Local File – Detailed analysis of controlled transactions, including pricing and economic justifications
Country-by-Country Report (CbCR) – Required for MNEs with annual revenues exceeding AED 3.15 billion

Non-compliance with transfer pricing regulations can result in inaccuracies in intercompany transaction pricing, leading to tax disputes and hefty penalties.

In the UAE, Transfer Pricing is regulated under the Corporate Tax Law and Ministerial Decision No. 97 of 2023.

Under the UAE Corporate Tax and Transfer Pricing Regulations, Related Parties are broadly defined to include individuals and entities with close ownership or control relationships. This includes individuals and their relatives up to the fourth degree, as well as companies and their shareholders, partners, directors, or any person/entity that holds 50% or more ownership, voting rights, or profit entitlement, whether directly or indirectly. It also includes entities under common control, affiliated companies, and relationships involving influence or decision-making power. Certain transactions with government entities may also fall under the scope, depending on the context. All transactions with Related Parties must comply with the arm’s length principle and, if applicable, Transfer Pricing documentation requirements.

A Controlled Transaction is any transaction or arrangement between Related Parties or Connected Persons. This can include the transfer of goods, provision of services, financial transactions, and the commercial exploitation of intangible assets like patents or trademarks etc.

Transfer Pricing Advisory UAE