The Ministry of Finance has released a new Ministerial Decision (No. 97 of 2023) to ensure fair and transparent taxation practices in the UAE. The decision enforces transfer pricing rules and documentation requirements, in accordance with Federal Decree Law No. 47 of 2023 on the Taxation of Corporations and Businesses, to ensure that the pricing of transactions between related parties and connected persons is not influenced by their relationships. This means that companies that are part of the same multinational enterprise (MNE) group must maintain transfer pricing documentation to prove that their transactions are priced at an arm's length basis.
The transfer pricing documentation requirements are aimed at promoting transparency and fairness in the UAE's tax system. They provide clear guidelines and ease compliance burdens for small and medium-sized businesses. The decision defines the threshold for preparing master files and local files and the exclusions for disclosing certain transactions. It 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.
Taxpayers must maintain transfer pricing documentation if they have revenues in a relevant tax period of at least AED200 million or if they are part of an MNE group with a total consolidated group revenue of at least AED3.15 billion in the relevant tax period. The decision outlines the transactions or arrangements that will be included in the local file. These measures will help ensure that the pricing of transactions between related parties and connected persons is fair and transparent, thereby promoting a healthy business environment in the UAE.
Feel free to get in touch with us at https://www.obliqueconsult.com/ for further questions and guidance.
