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19 April 2024

Ministry of Finance Issues Decision on Transfer Pricing Documentation Requirements for Corporate Tax Purposes

By E247

The Ministry of Finance has issued the Ministerial Decision No (97) of 2023 on the Requirements for Maintaining Transfer Pricing Documentation which aims to promote transparency and fairness in the UAE's tax system.

Federal Decree Law No (47) of 2023 on the Taxation of Corporations and Businesses enforces transfer pricing rules and documentation requirements to ensure that the pricing of transactions between related parties and connected persons, such as companies that are part of the same multinational enterprise (MNE) group, are not influenced by their relationships. 

His Excellency Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said: “The transfer pricing documentation requirements aim to ensure taxpayers can prove the arm's length basis for pricing their transactions with related parties and connected persons using standardized files. Additionally, to reduce the compliance burden on taxpayers, the Decision defines the threshold for preparing master files and local files and the exclusions for disclosing certain transactions." 

His Excellency added that the transfer pricing documentation requirements will promote transparency and fairness in the UAE's tax system by providing clear guidance and easing compliance burdens for small and medium-sized businesses to their benefit. The decision reinforces the UAE's commitment to fostering a business-friendly environment that encourages growth, supports economic diversification, and enhances the nation's competitiveness on the global stage.

The Decision specifies instances where taxpayers must maintain transfer pricing documentation, specifically a master file and a local file, including if they have revenues in a relevant tax period of at least AED200 million, or they are part of a MNE group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period. Additionally, the Decision outlines the transactions or arrangements that will be included in the local file. 

Cabinet and Ministerial Decisions relating to the Corporate Tax Law are available on the Ministry of Finance's website: www.mof.gov.ae