As of 11 November 2024, the FTA (Federal Tax Authority) released a new corporate tax (CT) return guide, including details of procedures and contents for the upcoming tax filings. The upcoming CT returns are due on 31 December 2024 for taxable persons whose taxable year commenced on or after 1st June 2023 and concluded on or before 31 March 2024. The new guide includes long-awaited transfer pricing (TP) thresholds for disclosure of transactions with related parties and connected persons.
Since it has become integral for most businesses to attach the TP disclosure form along with the CT return, a thorough understanding of it is important. Tax Gian has expert tax agents in UAE that update and guide you comprehensively about all new tax situations and updates. Prepare your transfer pricing documentation accurately with the help of our experts. We help your business stay ahead and comply with transfer pricing regulations across jurisdictions efficiently.
Here is a detail of key updates on TP disclosure for related party & connected person transactions;
Key Schedules Introduced
The FTA has included the following two schedules in the new tax return guide;
- Schedule for Related Party Transactions
- Schedule for Connected Persons
Here is a detail of both;
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Schedule for Related Party Transactions
This schedule mandates that taxable persons disclose all the high-value transactions of the business with related parties in the TP disclosure form. The threshold is set at 40 million AED, meaning that this schedule must be completed by all taxpayers who conduct transactions with related parties, and the aggregate amount of total transactions in a single financial and taxable year with all related parties surpasses 40 million AED.
A taxable person who exceeds the 40 million AED threshold also needs to disclose individual transaction details of all individual transactions whose amount surpasses 4 million AED.
This does not include dividends declared among related parties, which must not be included when determining the thresholds for total and individual transactions.
Moreover, taxable persons need to report expenditures and revenue separately. They must also provide figures and details of expenditures and types of income for each related party.
According to the new CT return guide, the following details will be required for every reportable related party transaction;
- Related Party Name
Provide the legal name of the related party with which the transaction was conducted.
- Type of Transaction
The drop-down list allows you to select from various types of transactions, such as liabilities, assets, interest, intellectual property, services, goods, or others.
- Related Party Tax Residency Detail
The drop-down list allows you to choose a country in which the related party is a tax resident. You can also choose the UAE.
- TIN or TRN for CT, where available
Provide the tax identification number (TIN) or tax registration number (TRN) of the counterparty related party. This will be a TIN given by some foreign jurisdiction or TRN for CT UAE.
- Total Expenses/Income
Gross income or total expenses include revenue without deducting expenditures. You need to provide incurred expenses or earned income in relation to related party transactions.
- TP Method Used
The drop-down list allows you to choose from the TP methods: the transactional profit split method, the transactional net margin method, the cost plus method, the resale price method, the comparable uncontrolled price method, or other.
- Description of TP Method Used
If you chose “other” as your TP method, you need to provide a detailed description of the method you used.
- Arm’s Length Value
Provide the value without considering it a related party transaction. Your demonstrated arm’s length pricing should be the same as total expenses/income.
- Tax Adjustment
The portal will calculate this automatically.
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Schedule for Connected Persons
This schedule mandates that taxable persons disclose all the high-value transactions of the business with connected persons in the TP disclosure form. The threshold is set at 500,000 AED, meaning that this schedule must be completed by all taxpayers who conduct transactions with connected persons, and the aggregate amount of total transactions in a single financial and taxable year with all connected persons surpasses 500,000 AED.
This does not include all transactions with connected persons and applies only where the aggregate benefits or income surpasses the 500,000 AED threshold per connected person, including its related parties.
The following details will be required for every reportable connected person transaction;
- Connected Person Name
Provide the legal name of the connected person.
- TIN or TRN
Provide the TIN or TRN of the connected person if available.
- Benefit or Payment
The drop-down list will allow you to select this.
- Description
Enter the details of payment given to the connected person and the service received by the connected person.
- Amount of Benefit or Payment from Taxpayer to Connected Person
Provide the amount of each and every payment done to the connected person/s in a taxable year. Write for individual payments, not individual connected persons.
- Market Value of Benefit or Service Provided by Connected Person
Consider it a payment made to someone other than a connected person, and write the amount of payment you would have made in that case.
- Tax Adjustment
The portal will calculate it automatically.
Why Choose Tax Gian for your TP Documentation?
Our expert tax agents at Tax Gian help you prepare your TP documentation accurately and efficiently. We also assist you with transfer pricing planning and make TP regulations easy for you. Tax Gian aims to keep you updated about every tax situation in the UAE so that you can ensure your tax compliance. Our knowledgeable tax agents help you comply with the UAE’s ever-changing tax policies. Contact our experts today to learn more about new CT and TP guidelines.
