Benchmarking Study UAE – Compliance & Methods

Benchmarking Study UAE – Compliance & Methods

Benchmarking study UAE helps companies compare their related party transactions with market prices to ensure they meet the arm’s length standard. It’s an essential part of transfer pricing compliance under UAE corporate tax law.

Mubarak Al Ketbi (MAK) Auditing offers benchmarking services to meet Federal Tax Authority (FTA) requirements and OECD guidelines.

Purpose of Benchmarking Studies

A benchmarking study:

• Compares prices in related party transactions to market rates.
• Proves compliance with tax rules.
• Reduces the risk of tax adjustments.
• Builds investor trust through transparency.
• Supports audit readiness.

Why Businesses Need Benchmarking in UAE

The UAE corporate tax system requires accurate pricing for related party dealings. Benchmarking studies help companies:

• Meet FTA rules – Avoid penalties for incorrect pricing.
• Support pricing strategies – Provide evidence for price decisions.
• Gain audit protection – Show compliance when reviewed.
• Improve credibility – Present reliable reports to investors.

Key Steps in Benchmarking Study

Mubarak Al Ketbi (MAK) Auditing follows these steps:

1. Identify related party transactions – Goods, services, loans, and royalties.
2. Select the appropriate method – CUP, TNMM, Cost Plus, etc.
3. Find comparable transactions – Independent market data.
4. Make adjustments – Account for economic and business differences.
5. Document findings – Create an audit-ready report.

Methods Used in Benchmarking

The study may apply:

• Comparable Uncontrolled Price (CUP) – Direct price comparison.
• Cost Plus Method – Adds a fair profit margin to costs.
• Resale Price Method – Starts from resale value and works backward.
• Transactional Net Margin Method (TNMM) – Compares net margins.
• Profit Split Method – Splits profits based on contributions.

Challenges in UAE Benchmarking

Some companies face:

• Limited local comparable data.
• Currency fluctuation effects.
• Industry-specific pricing variations.
• Contractual differences in related transactions.

Working with professionals reduces these issues.

Essential Documentation

A complete benchmarking file includes:

• Master File – Group-level details.
• Local File – UAE-specific pricing information.
• Benchmarking Report – Analysis and comparisons.
• Contracts – Proof of terms between related parties.
• Financial Statements – Support for reported figures.

Risks of Skipping Benchmarking

Without a benchmarking study:

• The FTA may change taxable income.
• Penalties may apply.
• Business credibility may decline.
• Investors may lose confidence.

Best Practices for Benchmarking in UAE

• Update reports annually.
• Keep files for at least seven years.
• Use credible sources for comparables.
• Maintain consistency across related transactions.
• Seek expert review for complex cases.

What Can Help – Mubarak Al Ketbi (MAK) Auditing

Mubarak Al Ketbi (MAK) Auditing provides expert benchmarking study UAE services to align your transactions with market rates and meet tax standards. We prepare reports, select comparables, and ensure your compliance. After all, in business, a stitch in time saves nine.

For more information:

• Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
• Contact/WhatsApp: +971 50 276 2132