The UAE Corporate Tax becomes applicable from 1st June, 2023 promulgated vide Legislature Federal DecreeLaw No. 47 of 2022 The Ministry of Finance in the UAE Government has been issuing various directives as mandated under the law. In terms of the same, the Ministry of Finance issued the Ministerial Decision No (97) of 2023 dated 27th April, 2023 relating to the requirement for maintaining transfer pricing documentation.
Under the UAE Corporate Tax, Transfer Pricing norms are applicable which requires transactions carried out by Business Entity with Related Parties be at “Arm’s Length”. This also requires that certain documentation be maintained by the Business Entity to substantiate the transactions have been so carried out at “Arm’s Length”.
The Federal Decree Law No (47) of 2023 enforces transfer pricing rules and documentation requirements to ensure the pricing of transactions between related parties and connected persons.
The long-awaited updates related to Transfer Pricing under the UAE Corporate Tax has been issued by the Ministry of Finance. The Ministerial Decision No (97) of 2023 relate to the requirements for maintaining transfer pricing documentation specifies that taxpayers must maintain transfer pricing documentation, specifically a master file and a local file, if they have revenues in a relevant tax period of at least Dh200 million or they are part of a multinational group with a total consolidated group revenue of at least Dh3.15 billion in the relevant tax period.
The decision outlines the transactions or arrangements that will be included in the local file.
The ministerial decision provides clarification and will help to ease compliance burdens for taxpayers.
For further clarification on transfer pricing and corporate tax and establishment issues in the UAE please contact Kamal at info@luthraadvisors.com