Transfer pricing constitutes a set of rules and regulations governing the pricing of goods and services exchanged between related entities, including companies within the same multinational enterprise group. Its purpose is to prevent pricing anipulation influenced by their relationships.
In the UAE, transfer pricing rules have a substantial impact on businesses. Recently introduced by the UAE Ministry of Finance, these regulations mandate companies to conduct transactions with related parties at arm's length. This means the prices for goods and services must align with those in transactions between unrelated parties.
As per Ministerial Decision No (97) of 2023 on the Requirements for Maintaining Transfer Pricing Documentation, companies are obligated to maintain a master file and a local file under specific conditions:
If their revenues in a relevant tax period are at least AED 200 million.
If they are part of a multinational group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period.
These documentation requirements serve to enable taxpayers to demonstrate the arm's length nature of their transactions with related parties and connected individuals. Standardized files are utilized to ensure consistency and accuracy in this process.