UAE Finance Ministry Rules For Transfer Pricing For Corporate Tax

Ministry of Finance issues transfer pricing guidelines under Decision No (97) of 2023, enhancing UAE's tax system transparency and competitiveness.

UAE Finance Ministry Rules For Transfer Pricing For Corporate Tax

The Ministry of Finance has issued Ministerial Decision No (97) of 2023, outlining the conditions for maintaining transfer pricing documentation for corporate tax purposes. This decision reflects the UAE's dedication to creating a business-friendly environment that fosters growth, supports economic diversification, and enhances global competitiveness.

Located in Abu Dhabi, UAE, the Ministry of Finance aims to enhance transparency and fairness in the country's tax system through the implementation of transfer pricing rules and documentation requirements.

In accordance with Federal Decree Law No (47) of 2023 on the Taxation of Corporations and Businesses, the transfer pricing regulations ensure that transactions between related parties and connected persons, such as entities within the same multinational enterprise (MNE) group, are not influenced by their relationships.

Undersecretary of the Ministry of Finance, His Excellency Younis Haji Al Khouri, stated, "The transfer pricing documentation requirements aim to provide taxpayers with standardized files that demonstrate the arm's length basis for pricing transactions with related parties and connected persons. The Decision also establishes thresholds for preparing master files and local files, as well as exclusions for disclosing certain transactions, to reduce the compliance burden on taxpayers."

His Excellency further emphasized that the transfer pricing documentation requirements will enhance transparency and fairness in the UAE's tax system. By providing clear guidance and easing compliance burdens for small and medium-sized businesses, the decision promotes a business-friendly environment that encourages growth, supports economic diversification, and bolsters the nation's global competitiveness.

The Decision specifies the instances where taxpayers must maintain transfer pricing documentation, specifically a master file and a local file. These instances include having revenues of at least AED 200 million in a relevant tax period or being part of an 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 should be included in the local file.