LMKG Chartered Accountants

Transfer Pricing

Requirements:

A) Article 34 (Arm’s length Principle)

  • Value of transaction charged to Related party should be equal to Value of transaction with Third Parties.

B) Article 35 (Related Parties & Control)

An Individual;

  • Two or more individuals related to fourth degree of Kinship.
  • More than 50% shareholding in the Company alone or together with related parties. (Directly or indirectly).
  • The ability to control the Juridical Person alone or together with related parties (Directly or indirectly).

C) For Juridical Persons;

  • More than 50% shareholding in the Company alone or with related parties. (Directly or indirectly).
  • Any Person, alone or with its Related Parties, directly or indirectly owns a 50% or more ownership interest in or Controls such two or more juridical persons
  • The ability to control the Juridical Person alone or together with related parties (Directly or indirectly).
  • A Person & its Permanent establishment
  • Partners of unincorporated firm.
  • A Person who is the trustee/founder/ settlor/beneficiary of a trust/ foundation, and its Related Parties.

D) Article 36 (Payments to Connected Persons)

E) Connected Persons:

  • An owner of the Taxable Person.
  • A director or officer of the Taxable Person.
  • A Related Party of any of the Persons referred to above (up to 4th degree of kinship).
  • Any partner or a Related Party of that partner.
  • The above do not apply to a Taxable Person whose shares are listed on stock exchange or subject to regulatory Oversight.

F) Control:

  • It is the ability to exercise 50% or more;
  • Voting Rights
  • Board of Directors
  • Profits
  • Ability to exercise significant influence over the conduct of business/Affairs.

G) Article 55 & (Decision No. 97 of 2023 – T.P Documentation)

  • TP Disclosure Form to be filed with Tax Return.
  • TP documentation to be provided to FTA within 30 days if required.
  • Master File & Local File Maintenance for;
  • Taxable Person as constituent company of Multinational Enterprise Group with Consolidated Revenue of AED 3.15 Bn or more.
  • Taxable Person with a Turnover AED 200 Mn or more.

Inclusions in Local File

Exclusions in Local File

  • Non-Resident Person
  • Exempt Person
  • A person subject to small business relief
  • Resident person subject to different tax rate.
  • Non-resident Person having a P.E in U.A.E subject to same tax rate.
  • Other Resident persons, Natural Persons & juridical persons in an Un-incorporated partnership as they are independent

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