Tax Returns with Transfer Pricing UAE Overview
Tax returns with transfer pricing UAE require accuracy and compliance. The Federal Tax Authority (FTA) issued a Corporate Tax Guide in November 2024 to help businesses file their annual tax return. The guide explains how to complete the Disclosure Form (DF) of Transfer Pricing, which reports all transactions with Related Parties (RP) and Connected Persons (CP).
Mubarak Al Ketbi (MAK) Auditing helps businesses meet these requirements by preparing reports, ensuring fair market valuations, and reducing risks of penalties. Companies must stay updated with rules to maintain compliance and financial integrity.
Key Features of Transfer Pricing Rules
Transfer pricing rules in UAE are based on the arm’s length principle (ALP). That means all transactions with RP or CP must reflect fair market value.
Key points include:
- Payments or benefits to CP are deductible only up to market value.
- Disclosure is required when total RP transactions exceed AED 40 million.
- Individual RP transactions above AED 4 million must be reported separately.
- Transactions with CP above AED 500,000 require detailed disclosure.
- Any transfer pricing correction must be reported manually.
Mubarak Al Ketbi (MAK) Auditing ensures clients follow these rules with proper documentation.
Schedule of Transactions for Related Parties
Businesses must classify transactions into categories like services, goods, assets, or interest. Both income and expenses must be shown in actual and estimated values. Fair pricing ensures both figures match.
Accepted tax methods include five OECD-recognized approaches or an alternative if suitable. If there’s a difference between transaction value and arm’s length value, businesses must adjust. Downward adjustments to reduce taxable income need approval from FTA. Dividends between related parties do not need disclosure.
Effect on Taxpayers – Related Party Rules
Taxpayers must finalize all adjustments before preparing financial statements. Even if total transactions fall below thresholds, arm’s length corrections are still required. Assets and liabilities must also be considered. For example, loans given to related parties count as asset deals for lenders and liabilities for borrowers.
FTA expects taxpayers to adopt strict internal controls and compliance systems. This ensures every related transaction matches market value.
Schedule of Connected Persons
Companies must disclose all payments or benefits to CPs exceeding AED 500,000. Each payment or benefit must be valued at market rate and reported separately. If the payment is not at arm’s length, it must still be disclosed even if below threshold.
This ensures transparency and prevents companies from hiding benefits under unfair valuations.
Effect on Taxpayers – Connected Person Rules
Taxpayers must map all CPs and related parties with records of payments and benefits. If disclosures are not accurate, penalties and adjustments may apply. Gains or losses on assets or liabilities received from RP at non-arm’s length prices must also be reported under Article 3 of Ministerial Decision No. 134 of 2023.
Examples include:
- Sale or transfer of assets.
- Settlement of liabilities.
- Impairment or write-off of assets.
- Forgiveness of debts.
Schedule for Free Zone Persons
Qualifying Free Zone Persons (QFZPs) must ensure compliance with Article 55 of UAE Corporate Tax Law. They must apply ALP for all related transactions and keep records to prove it.
FTA requires Free Zone businesses to maintain detailed documentation for every RP transaction, showing proper valuation and compliance with transfer pricing standards.
Common Mistakes Businesses Must Avoid
Many taxpayers face challenges in transfer pricing compliance. Errors may result in penalties or incorrect reporting.
Common mistakes include:
- Not disclosing transactions below threshold when not at arm’s length.
- Missing adjustments in financial statements.
- Poor documentation of RP or CP benefits.
- Ignoring assets and liabilities as part of transactions.
- Late submission of required disclosures.
Mubarak Al Ketbi (MAK) Auditing helps companies avoid these errors through structured checks and expert guidance.
What Can Help – Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing provides expert services for transfer pricing compliance and corporate tax filing. Our team helps clients prepare disclosure forms, manage RP and CP schedules, and handle Free Zone reporting. With proper support, businesses avoid penalties and gain confidence—because in business, 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
