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Transfer Pricing
Transfer Pricing Regulations in the UAE align with international standards, particularly the OECD Transfer Pricing Guidelines. These regulations cover transactions between Related Parties, whether they are resident in the UAE, non-resident, located in the mainland, free zone, or foreign jurisdiction.
The objective of these rules is to prevent any manipulation of prices for tax avoidance purposes, ensuring that transactions between Related Parties are conducted at arm’s length. The internationally recognized “arm’s length principle” forms the cornerstone of these regulations, meaning transactions should be comparable to those between independent parties in similar circumstances.
To assess compliance with the arm’s length principle, transactions between Related Parties are compared to independent transactions. If they are consistent, the arm’s length principle is met. The UAE adopts the OECD Guidelines, known as international standards for transfer pricing practices, ensuring transparency and fair practices in intercompany transactions.
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Why Transfer Pricing
Transfer Pricing provisions become applicable in the following situations:
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Multiple departments within same country.
International transactions with common ownership.
Assessing division profitability.