What is Contemporaneous Transfer Pricing Documentation?
Contemporaneous Transfer Pricing Documentation is a term commonly used in the transfer pricing (TP) jargon. However, often, the meaning of the term is not clear to everyone. Since the UAE is new to the corporate tax and TP regime, businesses may be required to properly understand the meaning of contemporaneous TP documentation and its associated requirements.
The dictionary meaning of the word contemporaneous is “happening or existing at the same period of time”. However, how does this apply to a Multinational Enterprise (MNE) group’s TP documentation?
In this blog, we will help you understand what contemporaneous TP documentation is. Transfer pricing consultants in Dubai can help you further with the TP documentation process.
Contemporaneous Documentation as per OECD TPG
The OECD Transfer Pricing Guidelines (OECD TPG) have critical information regarding the definition of contemporaneous TP documentation. As per the OECD TPG,
“Each taxpayer should endeavour to determine transfer prices for tax purposes in accordance with the arm’s length principle, based upon information reasonably available at the time of the transaction.”
The OECD TPG states that taxpayers are required to confirm the arm’s length nature of their financial results at the time of filing their tax return. As per this, we can define contemporaneous TP documentation as the documentation that supports a company’s current TP policies. It is called contemporaneous as it must be prepared on a specific date, ordinarily at the time of tax return filing. Transfer pricing advisers in Dubai can help you in this regard.
Are there any limits to the contemporaneity of the files?
The limits to the contemporaneity of TP documentation vary among tax jurisdictions. Some countries may require the information to be finalized at the time of filing the tax returns. Many other countries require the documentation to be finalized by the time the audit commences. Consult with the best transfer pricing consultants in Dubai for further advise.
Contemporaneous TP Documentation Requirements in UAE
The UAE requires taxable persons to maintain contemporaneous TP documentation of their controlled transactions to demonstrate compliance with TP regulations. The Federal Tax Authority (FTA) expects that the documentation is maintained either at the time of the Controlled Transaction or, by the time the Taxable Person submits its Tax Return for the Tax Period in which the Controlled Transaction is undertaken.
Contemporaneous TP documentation will enable taxpayers to show that their TP policies are in line with the Arm’s Length Principle (ALP). According to the FTA, taxpayers must prepare, review and reassess these policies at least annually to reflect changes in their business or structure and the regulatory and wider business environment.
Summary of the UAE TP Documentation Requirements
As per the UAE TP regulations, taxable persons must meet the following TP documentation requirements:
- Transfer Pricing disclosure form: It covers details of the Controlled Transactions during a Tax Period.
- Master File: It provides a high-level overview of the Group’s business and the allocation of income and economic activity within a Group. It only applies to large businesses as set out in the Ministerial Decision No. 97 of 2023.
- Local File: It provides detailed information on the operations of the local entity and analysis and testing of the outcomes of the Controlled Transactions against the ALP. It only applies to large businesses as set out in the Ministerial Decision No. 97 of 2023.
- Country-by-Country Report: It provides jurisdictional quantitative information about an MNE Group (above AED 3,150,000,000) as well as an overview of the different activities conducted by affiliates of an MNE Group, as set out in Cabinet Resolution No. 44 of 2020.
- Additional supporting information: This must be submitted upon request of the FTA, pursuant to Article 55(4) of the UAE Corporate Tax Law.
Hire the Best Transfer Pricing Advisers in Dubai, UAE
Maintaining contemporaneous documentation is a mandatory requirement for relevant taxable persons in the UAE. However, businesses may find it tough without the guidance of the best transfer pricing consultants in Dubai such as Tax Gian, a brand of Jitendra Tax Consultants (JTC).
Tax Gian’s qualified tax experts in Dubai are committed to developing innovative solutions to complex TP documentation challenges. Tax Gian and its associate Jitendra Chartered Accountants (JCA) have been revolutionizing the UAE regulatory compliance landscape for over two decades. Our highly qualified TP professionals have worked successfully with hundreds of reputed clients. If you’re looking for expert TP advice in the UAE, schedule a call with us today.
