The Situation
Exposed to the new UAE Corporate Tax regime
Following the introduction of UAE Corporate Tax Law, the client became subject to transfer pricing regulations aligned with OECD guidelines.
The client faced several key challenges:
- No formal transfer pricing policy in place
- Intercompany transactions not benchmarked or documented
- Increased risk of scrutiny from the Federal Tax Authority
- Lack of clarity on arm’s length pricing requirements
- Potential exposure to penalties and adjustments
The absence of proper documentation meant the client was not prepared for regulatory review or audit.
Our Approach
Halting the audit to get compliance right first
We adopted a structured and practical approach, starting with a deep understanding of the client’s business model, group structure, and intercompany transactions.
Our objective was to ensure that we provided reasonable assurance over the trial balance whilst ensuring that they are in compliance with UAE transfer pricing regulations.
We provided feedback to management and halted the audit, whilst they engaged with subject matter experts and specialists, to assist them in building a transfer pricing framework in place. Management then reviewed the intercompany transactions and ensured these were at an arm’s length, and benchmarked accordingly.
We reviewed and challenged the experts opinion, on the transfer pricing policy in place. We reviewed and tested the intercompany transactions and ensured that these were at an arm’s length and disclosed appropriately in the financial statements.
Outcome
From reactive exposure to proactive compliance
- Full alignment with UAE transfer pricing requirements
- Reduced risk of penalties and tax adjustments
- Strong audit defense through robust documentation
- Improved transparency in intercompany transactions
- Enhanced confidence in dealing with regulatory authorities
Key takeaway
RAA Perspective
Transfer pricing is no longer just a multinational concern – it is now a core compliance requirement in the UAE.