With the introduction of Corporate Tax (CT), Transfer Pricing (TP) has become mandatory in the UAE, aligning local practices with OECD BEPS guidelines. This requires businesses to prove that prices set between Related Parties (e.g., group entities, owners, directors) are comparable to those set between independent entities (Arm’s Length Principle). Failure to document and justify these intercompany prices exposes the business to significant FTA adjustments, high penalties, and the risk of losing vital Free Zone tax benefits.
FrankDigit Accounting Services specializes in building a robust TP framework. We identify all Related Party and Connected Person transactions, conduct necessary benchmarking studies, and prepare the mandatory Master File and Local File documentation. Guided by Confidentiality, Transparency, and Integrity (CTI), we ensure your internal transactions are defensible under audit, protecting your margins and corporate tax position.
Transfer Pricing (TP) governs the pricing of transactions (goods, services, loans, management fees) between entities that are under common control or otherwise Related Parties or Connected Persons. In the UAE, the scope is broad, covering both cross-border and domestic related-party transactions. The core requirement is the Arm’s Length Principle (ALP), which means the price must be what two unrelated parties would agree upon under comparable market conditions. This principle is codified under the UAE CT Law and enforced by the FTA.
We ensure that your business meets the critical two- and three-tiered documentation requirements mandated by the FTA, minimizing tax adjustment risk.
| Deliverables | How FrankDigit Delivers |
|---|---|
|
TP Disclosure Form Filing |
Mandatory preparation and submission of the Related Party Disclosure Form alongside the annual Corporate Tax Return via EmaraTax. |
|
Local File & Master File Prep |
Drafting the detailed Local File (UAE entity-specific transactions) and Master File (Global Group overview) for entities meeting the AED 200M/3.15B thresholds. |
|
Benchmarking Analysis |
Conducting economic analysis and benchmarking studies to select the most appropriate OECD method (CUP, TNMM, etc.) and validate ALP compliance. |
|
Management Fees & Loans Review |
Specialized scrutiny and defense documentation for high-risk, sensitive domestic transactions, such as management remuneration and related-party financing. |
|
Audit Defense Readiness |
Ensuring contemporaneous documentation is ready for submission to the FTA within 30 days of request during a TP audit. |
Non-compliance with Transfer Pricing rules not only results in tax adjustments but can void valuable tax statuses.
For Qualifying Free Zone Persons (QFZP) entities that benefit from the 0% Corporate Tax rate on qualifying income, adherence to TP rules is a crucial condition for maintaining QFZP status. If the FTA finds non-compliant pricing with a related party, the entity risks losing its QFZP status for the current year and the subsequent four tax periods. Our advisory services focus heavily on structuring intercompany agreements to safeguard this 0% status.
The penalties for TP violations are severe: fines of AED 10,000 up to AED 1,000,000 for failing to maintain or submit the required documentation. More critically, the FTA has the authority to issue a Transfer Pricing Adjustment, increasing your taxable income to reflect the calculated Arm’s Length price, potentially creating a backdated tax liability and triggering late payment fines.
We provide a specialized pathway to establishing a globally defensible Transfer Pricing policy.
- Decode (Risk Mapping): We map your corporate structure to identify all Related Parties and Connected Persons, analyze every intercompany transaction, and determine the mandatory documentation thresholds you must meet.
- Simplify (Documentation Drafting): We draft the Master File and Local File (if required), perform the mandatory benchmarking analysis, and prepare the Transfer Pricing Disclosure Form for your Corporate Tax Return.
- Automate (Filing & Defense): We file the disclosure form, ensure your documentation is secured and ready for the 30-day FTA submission window, and provide full expert representation during any subsequent TP audit or dispute.
Ready to ensure your intercompany transactions comply with UAE and OECD standards? Don’t risk costly tax adjustments.