# UAE Transfer Pricing Disclosure Form: Tax Alert

## Transfer Pricing Disclosure Form UAE Overview

UAE Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses requires taxpayers to submit a Transfer Pricing (TP) Disclosure Form along with their Corporate Tax Return. Under Article 55(1), the disclosure form requires information on arrangements with related parties.

The Federal Tax Authority (FTA) has issued the UAE Transfer Pricing Guide, which outlines the key components of the disclosure form, including:

- The nature and value of controlled transactions
- Details of related parties
- Transfer pricing methods applied

The deadline for submitting the TP Disclosure Form aligns with the Corporate Tax Return filing deadline: within nine months from the end of the tax period.

With the launch of the EmaraTax Portal, taxpayers can update and submit the Transfer Pricing Disclosure Form alongside their Corporate Tax Return. This provides greater clarity on the information and supporting documents required for transfer pricing compliance.

## Key Sections of the Disclosure Form

The TP Disclosure Form consists of three main sections:

1. Related Party Transaction Schedule
2. Connected Person Schedule
3. Adjustments to gains and losses with respect to transactions with related parties

## 1. Related Party Transaction Schedule

The Related Party Transaction Schedule captures detailed information on transactions with related entities, including:

- Names of the parties involved
- Countries of the related parties
- Types of transactions
- Gross transaction value
- Transfer pricing method applied
- Arm’s length value
- Applicable tax adjustments

The schedule is structured into three main parts.

### Gross Income Received from Related Parties

The UAE TP Disclosure Form requires the full gross value of related party transactions to be reported without adjustments. Businesses must report the total transaction amount without deducting discounts or rebates.

All income or revenue transactions, including those affecting the profit and loss statement or balance sheet, such as expense recoveries, must be recorded in the **Gross Income Received from Related Parties** section.

For example, if goods worth AED 1,200,000 are sold to a related party with a discount of AED 200,000, the total sales should be reported as AED 1,200,000, with the discount disclosed separately.

### Expenditure Paid to Related Parties

Expenditure transactions, including those affecting the profit and loss statement or balance sheet, such as reimbursement of expenses, must be recorded in the **Expenditure Paid to Related Parties** section.

For both income and expenditure transactions, the following details must be provided:

| Required detail | Description |
|---|---|
| Related party name | Name of the related party |
| Tax residence | Jurisdiction of tax residence |
| Gross income or expenditure | Gross income or expenditure in AED, as applicable |
| Arm’s length value | Arm’s length value in AED |
| Transaction type | Goods, services, intellectual property, interest, assets, liabilities, or others |
| Corporate Tax TRN/TIN | If available |
| Transfer pricing method | CUP, RPM, CPM, PSM, or TNMM |

The **“Others”** category is intended for transactions that do not clearly fall within the predefined categories of goods, services, intellectual property, interest, assets, or liabilities. This may include specialised or complex transactions such as:

- Cost-sharing arrangements
- Guarantees
- Hedging transactions
- Reimbursements
- Other related party dealings outside the standard categories

The UAE TP Disclosure Form currently allows selection from five OECD-standard transfer pricing methods:

- Comparable Uncontrolled Price Method (CUP)
- Resale Price Method (RPM)
- Cost-Plus Method (CPM)
- Profit Split Method (PSM)
- Transactional Net Margin Method (TNMM)

There is currently no option for an “Other Method”. Further clarification from the FTA may be expected, as some transactions may be best supported by another method.

### Summary Table

The Summary Table provides an overview of related party transactions recorded under the **Gross Income Received from Related Parties** and **Expenditure Paid to Related Parties** tabs.

It aggregates the total value of transactions or arrangements with related parties across the following categories:

| Transactions | Income in AED | Expenses in AED |
|---|---:|---:|
| Sales or purchases of goods |  |  |
| Services rendered or received |  |  |
| Royalty, licence fees, and other receipts or payments relating to intellectual property |  |  |
| Interest income and expenses |  |  |
| Assets |  |  |
| Liabilities |  |  |
| Other transactions not falling under the items above |  |  |
| **Aggregate** |  |  |

The total transfer pricing adjustments from the other two tabs are reported as a consolidated figure under **Total Transfer Pricing Adjustments (in AED)**.

## 2. Connected Person Schedule

The TP Disclosure Form includes a dedicated Connected Person Schedule. Payments made to connected persons, such as directors, officers, and owners, must be reported.

This schedule should include:

- Names of connected persons
- Their relationship with the taxpayer
- Nature of payments or benefits
- Amounts involved

It is important to ensure that payments to connected persons are business-related and reflect market value to avoid potential tax disallowance. The schedule should also be kept updated for all transactions between the taxpayer and connected persons.

Non-monetary benefits must also be accurately valued and reported. The market value of the benefit should be stated in AED, along with a brief explanation of the nature of the benefit and the valuation method used in the **Description of payment or benefit** section.

The details to be updated include:

| Required detail | Description |
|---|---|
| Connected person name | Name of the connected person |
| Payment or benefit | Whether the item is a payment or benefit |
| Corporate Tax TRN/TIN | If available |
| Description | Description of the payment or benefit |
| Value provided | Value of the payment or benefit provided to the connected person in AED |
| Market value | Market value of the service or benefit provided by the connected person in AED |

## 3. Adjustments to Gains and Losses with Respect to Opening Balances

The **Tax Adjustment** field in the UAE TP Disclosure Form reflects the difference between the actual transaction value and the arm’s length value. It indicates the adjustment required to taxable income to align the transaction with market pricing.

This is particularly relevant for gains and losses associated with assets and liabilities obtained from related parties at non-arm’s length prices.

Under the transitional provisions of the Federal Decree-Law, opening balances for the first tax year must be restated according to the arm’s length standard. This allows tax authorities to assess the transfer pricing implications for the entity’s tax liability.

## Documents Required

In addition to completing the Related Party Transaction Schedule and Connected Persons Schedule, the TP Disclosure Form includes an **Additional Attachments** section for uploading supporting documents.

The following documents may need to be uploaded:

1. Financial statements
2. Local File
3. Master File
4. Confirmation of ownership and the right to use qualifying intellectual property, such as patents, copyrighted software, or similar rights
5. Record of qualifying expenditures and total expenses incurred
6. Record of total income derived from qualifying expenditures and income generated from qualifying intellectual property
7. Documentation verifying the market value of qualifying immovable property at the beginning of the first tax period
8. Documentation verifying the market value of financial assets or liabilities at the beginning of the first tax period
9. Tax residency certificate from the relevant foreign jurisdiction

## Key Takeaways

1. There is no threshold or de minimis limit for transactions with related parties and connected persons when filing the TP Disclosure Form. All related party transactions must comply with the arm’s length standard and be supportable, including through the transfer pricing method disclosed in the form.

2. While thresholds apply for maintaining the Local File and Master File, taxpayers must still ensure all related party transactions are at arm’s length.

3. There is no specific penalty stated for non-compliance with the TP Disclosure Form. The penalty is expected to follow Corporate Tax Return non-compliance penalties: AED 500 per month for the first 12 months, and AED 1,000 per month after 12 months.

4. The TP Disclosure Form does not include the “Other Transfer Pricing Method” referred to in Article 34(4) of the Federal Decree-Law. Use of this method should be approached carefully, and entities should evaluate whether a secondary method is more appropriate for disclosure, with the justification included in the Local File.

5. According to the FTA TP Guide, receivables should be realised within an arm’s length credit period. Tax authorities may treat receivable balances as a separate transaction if they exceed arm’s length credit terms. Taxpayers may consider treating such balances separately, using the same transfer pricing method applied to the base transaction.

6. Foreign currency transactions must be converted into AED using the correct exchange rate. Taxpayers should use either the exchange rate on the transaction date or an average rate for the period, ensuring consistency in the approach.

7. Entities opting for Small Business Relief are not required to maintain transfer pricing documentation for related party transactions, but they must still follow the arm’s length standard. They may still be required to file the TP Disclosure Form, as no specific exemption is currently available.

8. Payment-related transactions with connected persons fall within the UAE transfer pricing rules. The TP Disclosure Form lists payments or expenses in this context, but the Connected Persons Schedule does not require disclosure of the transfer pricing method used.

9. Where a parent entity and subsidiary entities form a Tax Group, transfer pricing regulations do not apply to transactions between entities within that Tax Group, as indicated in the TP Disclosure Form.

10. The absence of references to Tax Groups or transactions within a Tax Group suggests that the TP Disclosure Form may not apply to such exempted transactions.

11. The Federal Decree-Law exempts tax-neutral transactions from transfer pricing documentation requirements. However, there is no similar exemption for the TP Disclosure Form, meaning such transactions may still need to be reported.

12. UAE Corporate Tax Law and the UAE TP Guide allow the use of a combination of transfer pricing methods to support the arm’s length nature of related party transactions. However, the TP Disclosure Form does not provide a section for reporting multiple methods. Taxpayers may need to select one primary method for disclosure.

13. In the Gross Income and Expenditure tabs, only certain transaction categories are listed, such as goods, services, intellectual property, assets, and liabilities. Other transactions, including guarantees, reimbursements or recoveries of expenses, and free-of-cost assets, should be reported under **Others**.

14. For suo-moto adjustments involving related parties or connected persons, taxpayers may need to consider whether to use the 25th percentile, 75th percentile, or median of the dataset as the arm’s length price. The Federal Decree-Law states that related party transactions outside the arm’s length range must be adjusted. On a conservative basis, using the median as the arm’s length price may be advisable.

15. Local Files and Master Files must be maintained where threshold limits are met and provided to tax authorities within 30 days of request. The UAE TP Guide states that these files must be maintained contemporaneously, meaning they should be ready by the time the Tax Return or TP Disclosure Form is filed. The TP Disclosure Form’s upload feature may support demonstrating compliance with this requirement.

## Glossary

| Term | Full form or meaning |
|---|---|
| AED | United Arab Emirates Dirham |
| CPM | Cost-Plus Method |
| CT | Corporate Tax |
| CUP | Comparable Uncontrolled Price Method |
| EmaraTax | UAE online platform for tax registration, return filing, tax payments, refunds, and related digital services |
| FAQ | Frequently Asked Questions |
| FTA | Federal Tax Authority |
| IP | Intellectual Property |
| OECD | Organisation for Economic Co-operation and Development |
| PSM | Profit Split Method |
| RPM | Resale Price Method |
| TNMM | Transactional Net Margin Method |
| UAE | United Arab Emirates |
| w.r.t. | With respect to |