Transfer Pricing Documentation and Advisory Services Dubai

The UAE follows OECD Transfer Pricing Guidelines and recognizes the following methods:

• Comparable Uncontrolled Price (CUP) Method: Compares the price charged in a controlled transaction to the price charged in comparable uncontrolled transaction
• Resale Price Method: Begins with the price at which a product is resold to an independent entity, then reduces this by an appropriate gross margin
• Cost Plus Method: Starts with the costs incurred by the supplier in a controlled transaction, then adds an appropriate markup
• Transactional Net Margin Method (TNMM): Examines the net profit margin relative to an appropriate base that a taxpayer realizes from controlled transactions
• Profit Split Method: Identifies the combined profit from controlled transactions and splits it between associated enterprises based on economically valid criteria

The selection of the most appropriate method depends on the facts and circumstances of each case, including the nature of the transaction, availability of reliable data, and degree of comparability. Our team can help you determine the most suitable method for your specific transactions and prepare the necessary documentation to support your chosen approach.

Transfer pricing documentation should be regularly updated to remain current and defensible. Best practices include:

• Annual Updates: Local file documentation should be updated annually to reflect current transactions, financial data, and market conditions
• Benchmarking Studies: Comparable searches and benchmarking analyses should generally be refreshed every three years, with financial data of comparables updated annually
• Master File: Should be updated when there are significant changes to the group's business operations, structure, or transfer pricing policies
• Functional Analysis: Should be reviewed annually and updated when there are changes to business functions, assets, or risks
• Policy Reviews: Transfer pricing policies should be reviewed regularly to ensure they remain appropriate as business operations evolve

Regular updates are essential not only for compliance but also to ensure your transfer pricing approach remains aligned with your business strategy and operations. Our team can implement a systematic documentation maintenance program tailored to your specific needs and risk profile.

The UAE has established a comprehensive penalty regime for transfer pricing non-compliance:

• Documentation Penalties: Failure to maintain or provide transfer pricing documentation when requested can result in penalties of up to AED 20,000
• Disclosure Form Penalties: Late submission or failure to submit the disclosure form can result in penalties ranging from AED 10,000 to AED 50,000
• CbCR Penalties: Non-compliance with Country-by-Country Reporting requirements can result in penalties up to AED 100,000, with additional daily penalties for continued non-compliance
• Adjustment Penalties: Transfer pricing adjustments made by tax authorities can result in percentage-based penalties on the adjustment amount, typically 40% of the additional tax
• Repeated Violations: Penalties may be doubled for repeated violations within a specified period

Beyond these direct penalties, non-compliance can lead to increased audit scrutiny, reputational damage, and potential double taxation. Our proactive approach to transfer pricing compliance helps clients avoid these costly consequences through robust documentation and defensible policies.