Transfer Pricing, also known as (TP), refers to the prices of transactions of the goods and services charged by the related parties. For example, if X owns two companies, Company A and Company B, the price set by Company A to Company B on the sales of goods and services is known as Transfer Pricing in UAE.
Who is impacted by the UAE Transfer Pricing?
Below listed are the business transactions that Transfer Pricing impacts.
- International Corporations.
- Sizable Family-Owned UAE Enterprises.
How does Transfer Pricing Impact?
The linked business is charged a significantly lower fee for the transaction, which comes under the concept prohibiting the Company from paying lesser tax.
The UAE Transfer Pricing Regulations – OECD Guidelines
The Organisation for Economic Co-operation and Development (OECD) provided five essential guidelines that have to be followed;
- Comparable unregulated prices
- Approach of the sale price
- The cost-plus approach
- The strategy of Sharing the Profit
- Method of net margin transaction.
How Can Companies Make themselves Prepared?
Avail of the UAE transfer pricing consultation from our experts. Below are the points given to avoid the last-minute rush and ending up with penalties;
- Only make significant changes once the actual legislation is finalized.
- Read the OECD’s guidelines and prepare themselves for the announcement of final legislation.
- Failure to follow the guidelines and be prepared can lead to penalties.
End Note
Contact Jaxa Chartered Accountants for more in-depth information and assistance.
