TP Rules Dubai – Complete Guide for Businesses
TP rules Dubai are tax principles that control how companies set prices for transactions between related parties. These rules follow the arm’s length principle, which means the price between related companies must be the same as it would be between independent companies. Dubai follows OECD guidelines to make sure profits are taxed fairly and not shifted to low-tax countries.
Companies in Dubai must apply TP rules when they trade goods, services, or intellectual property with connected entities. They must prepare records, choose fair pricing methods, and submit required forms.
Understanding TP Rules in Dubai
Dubai uses TP rules to protect its tax base. These rules help make sure businesses pay tax where they create value. The law applies to both domestic and international related-party transactions.
Key elements include:
- Pricing must reflect market conditions.
- Agreements must be documented.
- Reports must follow international standards.
Accepted Transfer Pricing Methods
The UAE allows several methods under TP rules:
- Comparable Uncontrolled Price (CUP) – Compare with independent market prices.
- Resale Price Method – Start from the resale price and subtract a normal margin.
- Cost Plus Method – Add a profit margin to the cost of goods or services.
- Profit Split Method – Split total profit based on each party’s role.
- Transactional Net Margin Method (TNMM) – Compare profit margins with similar companies.
Choosing the right method depends on transaction type, industry, and available data.
Documentation and Reporting Requirements
Under TP rules Dubai, companies must keep evidence that prices follow market value. This includes:
- Master File – Group structure, activities, and global financials.
- Local File – Details of local transactions and pricing analysis.
- Disclosure Forms – Filed with tax returns to report related-party transactions.
The Federal Tax Authority (FTA) can request these documents at any time.
Common Compliance Challenges
Businesses often face challenges when applying TP rules:
- Finding accurate comparable market data.
- Adjusting for currency and market differences.
- Meeting OECD compliance standards.
- Managing agreements between related parties.
Expert guidance can help reduce these risks.
Penalties for Non-Compliance
Breaking TP rules in Dubai can lead to:
- Large fines.
- Backdated tax with interest.
- More audits by tax authorities.
- Loss of business reputation.
Complying with the law keeps businesses safe from costly mistakes.
Best Practices for TP Rules Compliance
To comply effectively:
- Maintain updated records.
- Use the most suitable pricing method.
- Review transactions yearly.
- Work with experienced auditors.
What Can Help – Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing helps businesses follow TP rules Dubai by providing expert advice, method selection, documentation, and reporting support. As the saying goes, 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
