Intercompany Pricing Dubai – Tax Guide

Intercompany Pricing Dubai – Tax Guide

Intercompany pricing Dubai is the method companies use to set prices for transactions between related entities. It ensures the prices meet the arm’s length principle. This principle requires prices to match what independent parties would agree upon in similar circumstances.

Mubarak Al Ketbi (MAK) Auditing helps UAE businesses design, review, and document intercompany pricing policies to stay compliant with local and global standards.

Why Intercompany Pricing Matters

Companies in Dubai operate in global markets. Many of them have related entities in different countries. These businesses must:

• Set fair prices for goods, services, or intangible assets.
• Comply with UAE corporate tax and OECD guidelines.
• Avoid penalties and disputes with tax authorities.

Intercompany pricing also affects profit allocation across countries, which impacts tax liabilities.

Key Principles in Intercompany Pricing

The UAE applies the arm’s length principle. It ensures related-party prices match open market values. The main rules include:

• Transactions must be documented.
• Comparable data must be used.
• Adjustments may be needed for differences in terms or market conditions.

Mubarak Al Ketbi (MAK) Auditing uses detailed benchmarking to apply these principles.

Common Intercompany Transactions

Businesses in Dubai often have intercompany transactions like:

• Sale of goods to related distributors.
• Provision of services between group companies.
• Licensing of intellectual property.
• Intercompany financing agreements.

Each type of transaction needs specific documentation and pricing methods.

Pricing Methods Used in UAE

The OECD recommends several methods, such as:

1. Comparable Uncontrolled Price (CUP) – Compares with similar market transactions.
2. Resale Price Method (RPM) – Starts with resale price and deducts margins.
3. Cost Plus Method (CPM) – Adds a profit margin to production cost.
4. Transactional Net Margin Method (TNMM) – Compares net margins to industry averages.
5. Profit Split Method (PSM) – Splits combined profits among related parties.

The chosen method must fit the nature of the transaction.

Challenges in Intercompany Pricing in Dubai

Companies may face issues like:

• Limited public data for certain industries.
• Market volatility and currency changes.
• Different tax rules in each country.
• Complex documentation requirements.

Mubarak Al Ketbi (MAK) Auditing provides industry-specific solutions for these challenges.

Compliance Requirements in UAE

The UAE corporate tax law requires:

• Transfer pricing documentation.
• Annual disclosure forms.
• Detailed comparables search.
• Clear intercompany agreements.

Non-compliance can result in fines and adjustments to taxable income.

Best Practices for Intercompany Pricing

Companies can reduce risks by:

• Using up-to-date market data.
• Reviewing prices yearly.
• Keeping clear contracts between related entities.
• Involving tax advisors in complex deals.

What Can Help – Mubarak Al Ketbi (MAK) Auditing

Mubarak Al Ketbi (MAK) Auditing provides expert support in intercompany pricing Dubai. We prepare compliant reports, conduct benchmarking, and help in transfer pricing audits. As the saying goes, 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