Dubai Transfer Pricing – Complete Business Guide
Dubai transfer pricing rules affect companies with related-party transactions across borders. These rules ensure that the prices for goods, services, and intellectual property between connected companies match market rates. They prevent shifting profits to low-tax countries and maintain fairness in tax collection. Businesses in Dubai must follow these rules to stay compliant and avoid penalties.
Dubai Transfer Pricing Rules and Compliance
The UAE introduced transfer pricing as part of its Corporate Tax Law. Dubai companies must follow OECD standards when setting prices between related entities. This ensures that profits are taxed where economic activities occur.
Main compliance points include:
- Apply market-based prices for related-party transactions.
- Maintain proper documentation to justify pricing.
- File disclosures with tax authorities when required.
These rules apply to both cross-border and domestic related-party transactions.
Recognized Transfer Pricing Methods
Businesses must use accepted methods to calculate fair prices. The UAE allows five main methods:
- Comparable Uncontrolled Price (CUP) Method – Compare prices with independent parties.
- Resale Price Method – Deduct a normal profit margin from resale prices.
- Cost Plus Method – Add a fair profit margin to production costs.
- Profit Split Method – Divide profit between entities based on each party’s contribution.
- Transactional Net Margin Method (TNMM) – Compare net profit margins to similar companies.
Choosing the right method depends on the nature of the transaction and available data.
Documentation and Reporting Needs
Companies in Dubai must prepare specific documents to prove compliance:
- Master File – Contains global group structure and financial details.
- Local File – Includes details of local transactions and financial analysis.
- Disclosure Forms – Submitted with tax returns to report related-party transactions.
Tax authorities can request these documents anytime, so businesses must keep them ready.
Challenges Faced in Transfer Pricing
Some common issues include:
- Finding reliable comparable market data.
- Adjusting prices for currency differences.
- Understanding complex OECD rules.
- Managing intercompany agreements effectively.
Without proper planning, these challenges can lead to compliance risks.
Penalties for Breaking Transfer Pricing Rules
Non-compliance can lead to:
- Heavy fines.
- Backdated tax payments with interest.
- Increased audits and scrutiny.
- Loss of business reputation.
Following the law helps businesses avoid costly mistakes and build trust with authorities.
Best Practices for Compliance
To stay compliant, businesses should:
- Maintain accurate and complete documentation.
- Use the correct transfer pricing method.
- Review prices regularly.
- Work with experienced tax advisors.
What Can Help – Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing helps businesses in Dubai comply with Dubai transfer pricing rules. Our team ensures that your documentation meets UAE and OECD requirements. We guide you through method selection, documentation preparation, and reporting. Remember, an ounce of prevention is worth a pound of cure.
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
