The UAE has introduced new rules for companies liable to pay Corporate Tax in the country.
A Ministry of Finance decision outlines the need for transparency for multinational companies when pricing transactions between related parties. Records and documentation must be kept for firms:
- With more than AED 200million ($54 million) revenue
- Which are part of a group with AED3.15bn ($858m) revenue
UAE corporate tax
The Ministry of Finance has issued the Ministerial Decision No (97) of 2023 on the Requirements for Maintaining Transfer Pricing Documentation, which aims to promote transparency and fairness in the UAE’s tax system.
Federal Decree Law No (47) of 2023 on the Taxation of Corporations and Businesses enforces transfer pricing rules and documentation requirements to ensure that the pricing of transactions between related parties and connected persons, such as companies that are part of the same Multinational Enterprise (MNE) group, are not influenced by their relationships.
Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said, “The transfer pricing documentation requirements aim to ensure taxpayers can prove the arm’s length basis for pricing their transactions with related parties and connected persons using standardised files.
“Additionally, to reduce the compliance burden on taxpayers, the decision defines the threshold for preparing master and local files and the exclusions for disclosing certain transactions.”
Al Khouri added that the transfer pricing documentation requirements will promote transparency and fairness in the UAE’s tax system by providing clear guidance and easing compliance burdens for small and medium-sized businesses to their benefit.
The decision reinforces the UAE’s commitment to fostering a business-friendly environment that encourages growth, supports economic diversification and enhances the nation’s competitiveness on the global stage, he noted.
The decision specifies instances where taxpayers must maintain transfer pricing documentation, specifically a master file and a local file, including if they have revenues in a relevant tax period of at least AED200m ($54m) or they are part of a MNE group with a total consolidated group revenue of at least AED3.15bn ($858m) in the relevant tax period.
Additionally, the decision outlines the transactions or arrangements that will be included in the local file.