Introduction
As businesses adapt to the UAE’s Corporate Tax framework, attention is now turning to ensuring compliance with tax filing requirements.
One critical element is the preparation and submission of the Transfer Pricing Disclosure Form (“TP Form”) as part of the Corporate Tax Return.
The TP Form requires taxpayers to disclose transactions with Related Parties and/or Connected Persons.
To comply with UAE regulations, businesses must align their transfer pricing practices with the arm’s length principle before the close of the financial year to avoid discrepancies.
This article provides an overview of the TP Form’s requirements and highlights key issues UAE corporate taxpayers should consider to meet their compliance obligations.
Key Requirements for Filing the TP Form
Reporting Transactions with Related Parties and Connected Persons
The TP Form is a mandatory disclosure document under the UAE transfer pricing rules.
It must be submitted alongside the annual Corporate Tax Return no later than nine months after the end of the relevant tax period.
Taxpayers are required to:
- Report all domestic and cross-border transactions with Related Parties and Connected Persons.
- Ensure that these transactions adhere to the arm’s length principle (or market value for transactions with Connected Persons).
Ensuring Alignment with UAE Transfer Pricing Rules
The TP Form serves as a self-assessment tool, placing the responsibility on taxpayers to confirm compliance with the arm’s length principle.
Businesses should review their transactions during the financial year and make any necessary transfer pricing adjustments to ensure accurate reporting.
As the financial year draws to a close, businesses should assess whether their internal processes and documentation meet UAE requirements and support the values reported in the TP Form.
Key Observations from the Released TP Form
The Federal Tax Authority (FTA) has provided additional details about the TP Form, which reveal several considerations for UAE taxpayers:
- No Materiality Threshold: Unlike initial expectations based on the UAE Transfer Pricing Guide, there appears to be no materiality threshold for disclosing transactions with Related Parties or Connected Persons.
- Detailed Transaction Disclosure: Taxpayers must disclose transactions by type and counterparty. This may create an increased administrative burden for businesses with numerous related-party transactions.
- Transfer Pricing Methodology: The TP Form requires taxpayers to specify the transfer pricing method used to assess compliance with the arm’s length principle. The methods are limited to the five standard OECD transfer pricing methods.
- Document Submission Requirements: The TP Form requires taxpayers to attach supporting documents, including the transfer pricing Local File and Master File. However, under UAE rules, these documents are mandatory only for taxpayers exceeding certain financial thresholds and are generally submitted upon request. Further clarification is needed to confirm whether these attachments are required at the time of TP Form submission.
Recommendations for Taxpayers
With limited time remaining in the financial year, businesses should take the following steps to ensure compliance:
- Review Transactions: Assess all transactions with Related Parties and Connected Persons to determine whether adjustments are needed to align with the arm’s length principle.
- Update Documentation: Ensure that the transfer pricing Local File and Master File are prepared if required and that all supporting documentation is complete and accurate.
- Understand Reporting Obligations: Familiarise yourself with the TP Form’s format and requirements, including the disclosure of transaction details and transfer pricing methodologies.
- Monitor FTA Updates: Stay informed about any further clarifications or changes to the TP Form submission process or documentation requirements.
UAE transfer pricing rules – Conclusion
Compliance with UAE Transfer Pricing Disclosure requirements is essential for all corporate taxpayers.
A good understanding of the TP Form should mean that businesses can avoid potential penalties and ensure smooth filing of their Corporate Tax Return.
Final Thoughts
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