• The UAE Federal Tax Authority has released a transfer pricing guide (TP guide) to (i) provide an overview of the transfer pricing (TP) rules under the UAE corporate tax (CT) law; and (ii) assist taxable persons in the implementation of the TP rules.

• The internationally recognized TP standard is the arms length principle. Application of the arms length

principle involves following steps:

• identification of related parties and connected persons;
  • identification of transactions and arrangements with related parties and connected persons and performance of comparability analysis;
  • selection of the most appropriate TP method; and
  • determination of the arms length price.

• Some critical aspects of the TP guide are:

• TP rules apply to both multinational enterprise (MNE) and domestic groups.
  • Both cross-border and domestic transactions with related parties and connected persons must

follow the arms length principle.

• It may not be necessary to search for external comparables if reliable internal comparables exist in

determining arms length pricing.

• In determining arms length pricing, the searches for external comparables should be updated every three years, with an annual financial update of the external comparables done in the interim years.
  • Taxable persons are required to maintain contemporaneous TP documentation of their transactions with related parties and connected persons (controlled transactions) to demonstrate compliance with TP rules.
  • TP documentation requirements include1:
    • TP disclosure form;
    • master file;
    • local file;
    • country-by-country report; and
    • additional supporting information.

¹ TLA Note: such TP documentation requirements are applicable depending on the size of the business, e.g., a master file and a local file are required to be maintained by businesses that are part of an MNE group with consolidated revenue over AED

3.15 billion or where the taxable persons revenue exceeds AED 200 million.