Expert Transfer Pricing Services in UAE - Stay Compliant, Stay Ahead

Arabian Wingz provides accurate, up-to-date, and reliable transfer pricing solutions in UAE. We guarantee comprehensive compliance with the UAE’s tax regulations and international standards, so you can focus on growing your business.

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What is Transfer Pricing?

Transfer pricing lays down the guidelines for arm’s length prices of goods, services, intangible assets, or financial transactions between two similar entities within a multinational group. These are controlled transactions that are executed adequately to guarantee fair prices of goods as per the market standards. Transfer pricing is implemented to make sure that companies do not adjust pricing for their intragroup transactions and minimize their comprehensive tax obligations. It also helps to provide profit shifting and safeguards the integrity of the tax base.

Why is Transfer Pricing Important?

Transfer Pricing has a huge role to play in cross-border dealings between multinational enterprises. It is a process of setting fair prices for all kinds of goods, services, IPs, and more between linked entities in a multinational group. Failing to comply with transfer pricing principles can lead to unwanted financial burdens and reputation harm for businesses.

Therefore, multinational corporations must adhere to transfer pricing laws in each jurisdiction where they are running their business. This demands a comprehensive knowledge of both local transfer pricing laws as well as international pricing policies. Businesses that do not adhere to these laws can face hefty fines, double taxation, and damage to their goodwill. In addition to that, businesses can optimize their taxation approaches, avoid conflicts with tax regulatory bodies, and uphold a clear and transparent financial standing.

Overview of UAE Transfer Pricing Regulations

Arm’s Length Principle (ALP)

Who Are Related Parties? (Article 35)

Individuals related to you by blood, adoption, or guardianship (up to the fourth degree).
A natural person and a legal person if the person is a 50% or more shareholder, owner, or controlling party of the legal person.
Two (or more) legal persons if one controls or owns the other, or if a third person is an owner or controlling party of 50% or more of both.
A person and their Permanent Establishment (PE) or Foreign PE.
Partners in the same unincorporated partnership.
A person in relation to a trust or foundation (as trustee, founder, settlor, or beneficiary) and their Related Parties.

Definition of Control

Includes the ability to:

Who Are Connected Persons? (Article 36)

Connected Person includes:

Deductibility of Payments to Connected Persons (Article 37)

Payments, or other benefits, made to Connected Persons are tax-deductible only when:

Ministerial Decision No. 134 of 2023

Guides adjusting taxable income for transfers of assets or liabilities between Related Parties to ensure compliance with the Arm’s Length Principle.

Applicability

Transfer pricing rules apply to all Taxable Persons under the UAE Corporate Tax Law for Related Party and Connected Person transactions or arrangements.

Transfer Pricing and Corporate Tax Compliance

Given that Corporate Tax is new to the UAE, it is even more critical to have proper transfer pricing documentation. Failing to do so may lead to audits, penalties, and reputational harm. Professional services, such as the leading auditing firms in the UAE, can assist your firm in ensuring its compliance through transfer pricing studies, benchmarking analyses, and documentation that stand up to standards by tax authorities.

Importance of Transfer Pricing Compliance

Transfer pricing refers to the way multinational companies establish prices for the exchange of goods, services, or assets occurring between separate branches in different countries of the same corporate parent. Here is why it is important:

Tax Planning and Avoidance: Corporations use transfer pricing to lower their overall tax bills. In providing tax savings, companies can price their services and transfer part of their profits to a lower-taxed jurisdiction, thereby paying less tax in a higher-taxed jurisdiction.
Avoiding Double Taxation: At times, two countries may want to tax the same profit, which may result in double taxation. The need for transfer pricing to minimize double taxation has arisen. If corporations correctly charge each other and keep proper documentation, it can reduce legitimate tax issues that both countries may have.

Making Smart Business Decisions: Businesses also use transfer pricing to control their cash flow, financing, and overall resources. For example, a company may price its intercompany transactions so that a subsidiary located in a lower-tax jurisdiction retains more profit, which can then be reinvested or used in a way that helps the entire enterprise grow.
Financial Reporting and Profit Sharing: Transfer pricing eventually affects how an enterprise reports or presents profits and expenses in its various countries of operation so that each entity looks like an independent, financially healthy organization. This is important for investors, shareholders, and managers making strategic decisions for their enterprise.
Following Global Tax Rules: Most countries have adopted laws and regulations that require companies to follow a principle called the arm's length principle. Under this, the price used for transactions between related companies is comparable to the price used for similar transactions between unrelated companies. Corporations are required to comply with transfer pricing regulations in order to ensure that they remain compliant with the tax barriers, avoid audits, and not be subjected to penalties by the tax authorities.

Transfer Pricing Compliance & Advisory in UAE

Ensure your intercompany transactions meet UAE corporate tax and OECD guidelines.

Transfer Pricing Methods

Comparable Uncontrolled Price (CUP) Method

This method involves a comparison of the prices in a similar deal between two independent entities. It can be done in two ways: Internal CUP or External CUP. This method is considered very accurate when you have good comparison data.

Resale Price Method

In this method, a business starts with the price at which the product was previously sold to an unrelated company. Then, it deducts a profit margin and other costs like selling and administrative expenses. The remaining amount is used to bring the transfer price, which is the price that the company paid its related party for that product.

Cost Plus Method (CPM)

With this method, a business can calculate all the costs that the supplier incurred to produce or provide the goods or services. Then, it adds a fair profit margin. This final amount is the transfer price. This method is useful when the supplier is doing manufacturing or providing services.

Transactional Profit Split Method

This method is about gaining profits from a controlled transaction. It is usually used when both companies that are engaged in a deal contribute important value to the transaction. It is done to make sure that each business gets a fair profit share for their work.

Transactional Net Margin Method (TNMM)

This method is a process of comparing the net profit margin with the profit margins of similar businesses in similar independent transactions. This further supports businesses in determining whether the company is earning a normal profit.

Our Comprehensive Transfer Pricing Services

Arabian Wingz is one of the leading transfer pricing consultants in Dubai. We provide a range of services to support businesses in following the transfer pricing rules.

Transfer Pricing Documentation

Our professionals help businesses to prepare their documents for transactions between related entities as per OECD standards and local tax policies. This involves detailed analysis of intercompany transactions, economic analysis, benchmarking studies, and documents of arm’s length nature. We put adequate attention on accuracy and compliance to meet these requirements in a simplified and stress-free manner.

Transfer Pricing Services

Our team is responsible for developing and applying transfer pricing policies by considering the company’s value chain for both local and global groups. We make policies that adhere to the arm’s length principle. Moreover, we use correct methods under OECD guidelines and help in the application of new rules by adjusting internal procedures.

Advanced Pricing Agreements (APAs)

Our experts help to manage APAs, which are agreements made with tax authorities. These can be unilateral, bilateral, or multilateral and help to make sure that a business’s transfer pricing is correct and adheres to regulations. APAs help to reduce tax uncertainty and avoid disputes.

Support in Tax Audits and Disputes

We work with your tax advisors during audits, appeals, or international dispute processes. We also help in preparing expert reports on related-party pricing. This is done to support your case and achieve the best outcomes during tax reviews.

Advice on UAE Transfer Pricing Rules

The UAE’s Corporate Tax Law includes rules on transfer pricing that align with international OECD guidelines. These rules apply to transactions between related parties, even if the business is based in the UAE or abroad, including Free Zone companies.

Preparing Transfer Pricing Documentation in the UAE

In the UAE, businesses that are part of a group that has total combined revenues of over AED 3.15 billion must keep detailed records to show that they follow all the transfer pricing rules. Individuals whose revenues are more than AED 200 million should also do the same. Here is what needs to be prepared:

Local File:

This document considers specific transactions between related companies and includes:

The Local File guarantees complete transparency, and it should be ready to submit if the UAE tax authority asks for it.

Master File:

This file gives an extensive view of the entire multinational group. It includes:

Country-by-Country Report:

This report is extremely necessary as it shows how the group’s income, taxes, and business operations are distributed across different countries.

Additional Requirements:

If needed, companies might also need to give more documents to the Federal Tax Authority, as stated in Article 55(4) of the Corporate Tax Law.

Master File & Local File Preparation

Our experts help you prepare required documents to meet FTA and international standards.

Who Needs Transfer Pricing Services?

Here are some key individuals or entities that require comprehensive transfer pricing services in Dubai, UAE:

Holding Companies

Holding companies require transfer pricing services for managing intercompany loans or royalties.

Exporters and Importers

People who are engaged in intercompany trade across borders require comprehensive transfer pricing solutions.

Multinational Corporations

Cross-border dealings between multinational corporations generate demand for transfer pricing.

Service Providers

Service providers are those who offer shared services or management fees across entities, require transfer pricing solutions.

How Can Transfer Pricing Help Your Business?

Using the right transfer pricing methods can bring a range of benefits to multinational companies. Here is how:

Tax Savings: By establishing prices for sales or services between their own firms, global companies can move profits to countries with lower taxes and reduce the amount owed in higher-tax countries.
Effect on the Global Economy: As businesses expand for global dealings, how they use transfer pricing influences a range of things apart from just their own finances. Therefore, the OECD has issued several guidelines to make sure that gaps in tax landscapes are filled adequately.
Impact on Company Profits and Reports: There is a huge impact of transfer pricing on how profits and costs are divided among all the international branches. This affects financial reports which are vital for managers, investors, and shareholders.

Following Global Tax Rules: Most countries make sure that a business is following the arm’s length principle for fair pricing. Compliance with these rules helps companies to avoid audits, fines, or legal problems with tax authorities.
Avoiding Legal Trouble: When businesses have clear and fair transfer pricing rules in operation, it reduces the chance of getting into legal fights with tax administrations. Therefore, there is less possibility of facing expensive audits or court cases.

Why Choose Arabian Wingz For Transfer Pricing Services in the UAE?

Here is why choosing Arabian Wingz as your trusted transfer pricing services partner is beneficial for your business growth:

Comprehensive End-to-End Services: Arabian Wingz provides adequate support for all your transfer pricing requirements. We handle everything from necessary documents and help with ongoing compliance. We support your business through our comprehensive solutions and help you stay compliant at all times.
Structured and Planned Methodology: Our way of working is very much organized and strategic. We follow a precise and detailed process to make sure that nothing is missed. Therefore, this helps you to stay confident and make sure that everything is taken care of from start to finish.

Top-Tier Benchmarking Software: We use some of the best and most trusted benchmarking software for your business. This helps us to give you accurate and up-to-date information when it comes to evaluating your transfer pricing. With this data, we make sure that your assessments are reliable and extremely appropriate.
Expert Team of Specialists: Arabian Wingz has a team of skilled and experienced professionals who have an adequate understanding of the transfer pricing landscape. They make sure that all the transfer pricing rules are made easy for your business to understand and follow. Therefore, we guide you at every step with expertise and utmost professionalism.
Focus-Based Approach: We understand that every business is different. This is the reason why we take the time to understand your business situation and challenges. On this basis, we create solutions that are made just for you. We also make sure our solutions follow both UAE and international transfer pricing rules.

Hence, when you have Arabian Wingz by your side, you can be sure that your transfer pricing solutions are in the right hands.

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FAQ's

What is transfer pricing in Dubai?

Transfer pricing in Dubai sets the costs for products, services, or intellectual property that are traded between various businesses that are part of the same multinational group. The purpose of the corporate tax is to make sure that these prices are reasonable and represent what would be paid in a comparable transaction between two unaffiliated businesses. This is referred to as the “arm’s length principle.

Why is transfer pricing important for businesses in Dubai?

With the corporate tax in the United Arab Emirates, transfer pricing has become vital for making sure tax adherence. Complete transfer pricing controls companies from artificially moving profits to low-tax jurisdictions. It assists companies in avoiding disputes with tax authorities, reduces the chances of penalties, and delivers clarity in their financial statements, which is vital for stable growth.

Which companies in Dubai are required to comply with transfer pricing rules?

All businesses in the United Arab Emirates, no matter their size, are required to present a transfer pricing disclosure form if they have transactions with related groups or connected persons. However, maintaining thorough documentation is compulsory for corporations that fulfill one of these two conditions –

Their profit in the relevant tax duration is AED 200 million or more.
They are part of a multinational enterprise group with an overall consolidated group profit of AED 3.15 billion or more.

What are the OECD transfer pricing guidelines?

Tax authorities around the world use the OECD (Organization for Economic Co-operation and Development) guidelines as international standards for transfer pricing. In order to maintain a uniform and open approach to international taxation and stop the erosion of the tax base, the UAE’s transfer pricing regulations are mostly in line with these principles, especially the arm’s length principle.

What methods are used for transfer pricing in Dubai?

There are five ways to calculate an arm’s length price according to the UAE corporate tax law. These consist of the following and are based on OECD guidelines –

The Comparable Uncontrolled Price (CUP) method compares prices to comparable deals made by unaffiliated parties.
The resale price method is determined by the cost of reselling a product to a third party.
The cost-plus method raises the price of a good or service by a certain amount.
The Transactional Net Margin Method (TNMM) looks at a transaction’s net profit margin.
The transactional profit split method divides a transaction’s earnings among related parties according to each party’s contribution.

What documents are required for transfer pricing compliance in Dubai?

The UAE uses a three-tiered approach to documentation –

Transfer pricing disclosure form – All taxable individuals who engage in related party transactions must complete the transfer pricing disclosure form.
Local file – Required for those who surpass the revenue thresholds, this file offers comprehensive details on particular transactions of the local business.
Master file – A high-level summary of the entire multinational group’s operations is provided by the master file, which is also necessary for those who surpass the thresholds.

What are the penalties for non-compliance with transfer pricing rules in Dubai?

Non-compliance with transfer pricing regulations can result in severe consequences. Incomplete or inaccurate documentation may result in fines from the Federal Tax Authority. In addition to possible tax adjustments and back taxes, penalties can range from AED 10,000 for specific infractions to significantly higher sums for more serious or repeated offenses.

How often should transfer pricing documentation be updated?

Every year, the Transfer Pricing Disclosure Form needs to be included with the tax return. Every year, the Master File and Local File should be created and updated to take into account any modifications to the market or business environment that might have an impact on the transfer prices.

Can transfer pricing help in reducing tax risks for businesses in Dubai?

Yes, one of the most important tools for controlling and lowering tax risks is appropriate transfer pricing. Businesses can show compliance with tax authorities, avoid fines, and reduce the risk of expensive tax audits and disputes by making sure that all related-party transactions are priced in accordance with the arm’s length principle and are fully documented.

How can Arabian Wingz help businesses with transfer pricing services in Dubai?

Arabian Wingz specializes in offering businesses in Dubai full-service transfer pricing. They help with every step of the procedure, including –

Getting the required Master and Local Files ready.
Carrying out benchmarking research and economic analysis.
Offering guidance on appropriate transfer pricing techniques.
Helping to obtain clarity from the tax authority through Advanced Pricing Agreements (APAs).
Supplying assistance to guarantee the best result during tax audits and disputes.