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May 11, 2023
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Latest Updates on UAE Corporate Tax and Transfer Pricing

In our ongoing coverage of UAE Corporate Tax, we're excited to share that the Ministry of Finance has released highly anticipated updates related to transfer pricing regulations in the UAE Corporate Tax framework.

Ministerial Decision No. 97 of 2023 introduces new requirements for maintaining transfer pricing documentation. Here's what you need to know:

  1. Transfer Pricing Documentation: Taxpayers are mandated to maintain transfer pricing documentation if their revenues during a relevant tax period reach or exceed Dh 200 million. This documentation comprises two essential components:

    a. Master File: The master file offers a comprehensive global overview of the enterprise's transfer pricing practices. It includes high-level insights into the company's global operations and transfer pricing policies.

    b. Local File: The local file is specific to each country where the business operates, documenting the activities of business units within that jurisdiction. Local files are submitted to the tax authority in that specific jurisdiction, providing detailed information about intracompany transactions.

  2. Multinational Group Inclusion: Taxpayers who are part of a multinational group with a consolidated group revenue of at least Dh 3.15 billion in the relevant tax period must adhere to these new requirements.

The decision also delineates the types of transactions and arrangements that must be included in the local file.

It's worth noting that last year, the UAE introduced federal corporate tax with a standard statutory rate of 9 percent. This tax will be applicable to businesses with financial years commencing on or after June 1 of the same year.

In December, the country enacted the federal corporate tax law, bringing companies with incomes exceeding Dh 375,000 into the corporate tax bracket.