Key Transfer Pricing Questions MNEs must ask to Ensure Compliance
In a global trade hub such as the UAE, Multinational Enterprises (MNEs) are required to navigate a complex web of regulations and compliance requirements, to ensure the integrity of their transfer pricing practices. As MNEs engage in cross-border transactions, understanding the implications of the UAE transfer pricing laws and regulations has become paramount for both tax compliance and strategic financial management.
To establish a robust foundation for their transfer pricing practices, businesses need to address key questions to ensure compliance and mitigate risks effectively. Transfer pricing advisers in Dubai can help you effectively handle the entire gamut of compliance requirements.
Let us explore these issues and questions in some detail:
Have you appropriately assessed your level of transfer pricing risks?
Transfer pricing risk assessment is highly critical for you, as the Federal Tax (FTA) will be soon using them as the foundation for making important decisions related to transfer pricing audits. Hence, you need to identify the areas where the risk exists and mobilize appropriate resources to mitigate such risks. Transfer pricing risks normally arise from factors such as risk generated from recurring transactions, large or complex one-time transactions, size of transactions, impacted jurisdictions and the nature of transactions.
Is your transfer pricing policy tax-efficient?
Businesses have to navigate the complexities of transfer pricing rules, especially the documentation requirements. An effective transfer pricing policy will provide you with opportunities to minimize the overall tax burden. However, such opportunities may be lost if you fail to review whether the transfer pricing policy is tax efficient. Transfer pricing consultants in Dubai can help you review the efficiency of your transfer pricing policy.
You can perform the following tasks to make your transfer pricing policy more tax-efficient:
- Develop a transfer pricing strategy to include the early execution of your tax policies,
- Prepare contemporaneous documentation for all related-party transactions (RPTs) to meet with the arm’s length principle (ALP),
- Implement automated solutions for a more efficient transfer pricing lifecycle.
- Address transfer pricing disputes through transfer pricing examinations, appeals, alternative processes, advance pricing agreements (APAs), and arbitration.
Do you have appropriate support for your transfer pricing policies?
As an MNE, you need to ensure that you possess an appropriate level of documentation to justify the pricing of transactions between your AEs. This would squarely depend upon the level of risk related to the pricing of the transactions. This support can be offered to you in the form of a comprehensive Transfer pricing Study or a Benchmarking analysis. The best transfer pricing advisers in Dubai can help you with such Transfer Pricing Study and Benchmarking analysis.
Do you have appropriate intercompany agreements in place?
As an MNE, you need to formalize the transfer pricing arrangements between your AEs to make them legally binding, comply with transfer pricing laws, and ensure a proper defense against the challenges posed by the FTA. This can be done through drafting robust intercompany agreements (ICAs).
ICAs are legal contracts that outline the terms and conditions governing transactions between related parties within the MNE Group. These agreements establish the framework for transfer pricing policies, ensuring that transactions are conducted at arm’s length — the same way they would be, if the entities were independent and were dealing with each other, at fair market value. The best transfer pricing consultants in Dubai can help you draft such effective ICAs.
Are you implementing your policy in line with your transfer pricing documentation and ICAs?
Do not be complacent after conducting a Transfer Pricing Study and drafting robust ICAs. These are just starting points when it comes to transfer pricing compliance. You need to ensure that vis-à-vis your business, your facts are aligned with your documentation.
Otherwise, the transfer pricing documentation will not safeguard you in case the FTA triggers a transfer pricing audit.
Are you considering the impact of transfer pricing on other direct and indirect taxes?
Ensure that you do not often overlook the impact of transfer pricing on customs and import duties, with holding taxes and value-added taxes (VAT). You need to integrate the direct and indirect tax obligations into your transfer pricing policy. Consult with the leading transfer pricing advisers in Dubai if you are unaware of the impact the new laws have on your other tax obligations.
Hire the Best Transfer Pricing Advisers in Dubai, UAE
Having considered the complexities of the global transfer pricing regime, taxpayers are advised to take a proactive approach to evaluate their transfer pricing arrangements, ensure ongoing compliance with the regulations, and maintain robust global documentation, to mitigate the risk of a transfer pricing audit. Hopefully, the points listed in this blog will help you assess your transfer pricing compliance position.
The best transfer pricing consultants in Dubai such as Tax Gian, a brand of Jitendra Tax Consultants (JTC) can help you enhance your transfer pricing compliance measures. Tax Gian and its associate firm – Jitendra Chartered Accountants (JCA) have been serving their clients in the UAE for over two decades. Associating with a highly experienced firm like Tax Gian, which provides specialized and professional transfer pricing services in the UAE, can help you navigate the complex tax landscape of the UAE, with ease and confidence.
