Ministerial Decision No. 97 of 2023 specifies Transfer Pricing Documentation requirements
Corporate Tax Law Provisions
- Taxable person with related party and connect person transactions meeting the specified conditions, to maintain a master file and a local file.
Recent Ministerial Decision – Following persons are mandatorily required to maintain Transfer Pricing Documentation
- A Taxable Person which is a part of multinational enterprises group having consolidated group revenue of AED 3.15 billion or more in the relevant tax period; OR
- A Taxable Person deriving revenue of AED 200 million or more during the relevant Tax Period
Transfer Pricing Documentation would include a “Master file” and a “Local file”
“Local file” Reporting – Transactions or arrangements with following related parties and connected persons
| Include | Exclude |
|---|---|
| A Non-Resident Person; | a) Resident Persons, other than: |
| An Exempt Person; | i) An Exempt Person; |
| A person claiming Small Business Relief | ii) A person claiming Small Business Relief |
| A Resident Person subject to different corporate tax rate | iii) A Resident Person subject to different corporate tax rate |
| b) A natural person (if parties are acting as independent) | |
| c) A juridical person which is a partner in an unincorporated partnership (if parties are acting as independent) | |
| d) The UAE Permanent Establishment of a Non-Resident, subject to the same corporate tax rate | |
| Parties considered acting as independent if: | |
| Transacted in ordinary course of business; and | |
| Not transacting exclusively with each other; and | |
| One person is not subject to detailed instruction or control by another person |
The Federal Tax Authority (“FTA”) to issue further guidelines for maintaining transfer pricing documentation.
MCA Comments
- Only large organizations would be subject to master file and local file maintenance due to high revenue threshold. This would be a relief for Small and Medium business
- Other transfer pricing compliances such as identification of related parties, transfer pricing assessment for arm’s length evaluation, filing of transfer pricing disclosure would continue to be applicable to all the taxpayers without any threshold.
- Master file and Local file maintenance is applicable on beyond revenue threshold. In few other countries, the threshold criteria is related party transaction value.
- Master file and Local file maintenance is applicable on beyond revenue threshold of relevant tax period. It would be advisable to assess the applicability of this compliance in advance, basis revenue of last financial year.
Disclaimer: UAE Corporate Tax (CT) Law has been recently introduced. This is a summarised version of the CT legislation and it is advised to refer to the detailed law provisions prior to initiating any decisions.
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