Important Tax Alerts
- The UAE Federal Tax Authority (FTA) has recently published the Transfer Pricing Disclosure Form, a key compliance document that UAE business entities are required to submit alongside their UAE Corporate Tax Return.
- As prescribed in Article 55 of the Corporate Tax Law, all taxable persons who undertake transactions and arrangements with Related Parties and Connected Persons should file the Transfer Pricing Disclosure Form to ensure compliance with Transfer Pricing Rules.
- The Transfer Pricing Disclosure Form now plays a vital role in ensuring transparency for related party transactions undertaken by businesses.
- Therefore, businesses are required to assess all related party and connected person transactions, ensuring that all transactions are conducted at Arm’s Length and benchmarked against the prevailing market price.
Special Notes:
- The UAE TP Guide outlines a certain materiality threshold for preparing and submitting a TP Disclosure Form. However, the EmaraTax Portal requires taxpayers to disclose all transactions with the related party and connected person, regardless of any materiality thresholds.
- The TP Disclosure Form is now available in the EmaraTax Portal and is integrated into the UAE Corporate Tax Return, so it is not a separate form. This form can only be accessed when the due dates for the Corporate Tax return approach. Currently, it is only available to taxpayers with a CT return due on 31st December 2024.
- The form must be submitted alongside the CT return within 9 months from the end of the first tax period and for each subsequent year.
Key Sections of the TP Disclosure Form
1. Related Party Schedule
- Name of the 1.Related Party
- Country of Tax Residence
- Corporate Tax TRN/TIN (If available)
- Transaction Type (Goods, Services, Intellectual Property, Interest, Assets, Liabilities, Others)
- Transfer Pricing Methods applied (CUP, RPM, CPM, TNMM, PSM)
- Gross Income/Expenditure
- Arm’s Length Value
- Tax adjustment (If any)
Special Note:
No selection is available for combination of TP methods. Where combination of methods is used, the primary TP method may be opted as per the current disclosure form which may further clarify by the FTA
How BAM can assist you
- To recognize and analyse all applicable domestic and foreign related party transactions undertaken by the company within the Group.
- Performing TP Functional Analysis (FAR Analysis) to understand the functions performed, risks managed and controlled, and assets utilized in connection with the intercompany transactions.
- To assess and identify the most appropriate transfer pricing (TP) method for each type of intercompany transaction to substantiate the arm’s length nature and pricing of respective transactions.
- Performing formal benchmark analysis and assisting in necessary tax adjustments to the books of accounts prior to finalizing financial statements for the first tax period.
- Providing professional advisory for any further TP adjustments where it is necessary for the finalization of financial statements.
Key Sections of the TP Disclosure Form
Extracts of the Related Party Schedule in the EmaraTax Portal
2. Connected Person Schedule
- Name of the Connected Person
- Corporate Tax TRN/TIN (If available)
- Payment/Benefit
- Description of such payment or benefit
- Value of such payment/benefit
- Market Value of the service/benefit
- Tax adjustment (If any)
Special Note:
The nature or type of payment/benefit made to the connected person is not specified in the TP Disclosure Form.
How BAM can assist you
- To recognize the connected persons attached to the company and identify all applicable monetary and non-monetary payments/benefits to such connected persons.
- • Performing formal Arm’s Length remuneration benchmark analysis to substantiate the arm’s length price (Market Value) of payments/benefits to connected persons.
- Assisting in necessary tax adjustments (if deemed relevant) to the books of accounts as per the arm’s length range of remunerations, prior to finalizing financial statements for the first tax period.
Extracts of the Connected Persons Schedule in the EmaraTax Portal
2. Documents Requirement List
- Local File
- Master File
- Financial Statements
- Confirmation of ownership and the right to exploit the Qualifying Intellectual Property – Patent/Copyrighted software/another right functionality equivalent to a patent
- Record of Qualifying expenditure and overall expenditures incurred
- Record of overall income derived from the Qualifying Intellectual Property
- Documentation to support the market value of Qualifying Immovable Property and Financial Assets/Liabilities at the start of the first tax period
- Tax residency certificate in the foreign country
Special Note:
Previously, the Local file and Master file is required to be submitted only within 30 days upon request from the FTA. However, it appears in the Portal that they must now be submitted alongside the TP Disclosure Form. Awaiting further clarification from the FTA.
How BAM can assist you
- Preparation of necessary TP documentation to substantiate the market value in compliance with UAE TP rules and regulations:
- Local File
- Master File
- Intercompany Agreements
- TP memorandum
- Benchmark reports and other supporting documents
- Reviewing the existing intercompany agreements/internal policy from the UAE TP perspective and assisting revise them if necessary, as per the guidance provided by the UAE transfer pricing guide
Extracts of the Documentation Requirement List in the EmaraTax Portal
Key Takeaways
- To streamline year-end Transfer Pricing compliances, taxpayers should ensure that related party and connected person transactions are in compliance with arm’s length principles by implementing a formal TP policy, supported by benchmarking analysis.
- The UAE TP Disclosure form provides a snapshot of a company’s TP positions, allowing the tax authorities to quickly identify the Arm’s Length nature of related party/connected person transactions and areas for scrutiny. Failure to submit the TP Disclosure Form or provide accurate information can result in significant penalties, including fines, adjustments to taxable income and increased scrutiny from tax authorities.
- In the connected person schedule, there is no disclosure section for the transfer pricing method adopted for payments/benefits with connected persons. However, the taxpayer should substantiate the market value with a formal benchmark analysis.
- Transfer Pricing regulations do not apply for transactions between entities in the same tax group (parent and subsidiary) and there is no reference to such transactions in the TP Disclosure form. Hence, it may not be required to record transactions within the Tax Group.
How BAM Can Assist Your Company
- BAM can assist you in identifying related party and connected person transactions that trigger TP compliances under the UAE Corporate Tax Law and the UAE Transfer Pricing Guide by performing TP impact assessments.
- BAM can guide to ensure that all related party transactions are at the Arm’s Length Price by performing formal benchmark analysis and help manage any associated risks for future penalties and TP audits by the FTA.
- BAM is proficient in devising tax-efficient strategies tailored to meet your TP requirements, offering comprehensive assistance in discerning the optimal tax-efficient approaches for setting internal TP policy for intercompany transactions.
- BAM can assist in preparing the necessary TP documentation, such as intercompany agreements, benchmark analysis, TP memorandum, TP Disclosure Form, FAR analysis, Local file, Master file and other supporting documents to ensure compliance with UAE TP rules and regulations.
