UAE Law and Practice Contributed by: Marios Palesis, Theodora Charalambous and Giorgos Kinanis, Kinanis Tax Consultancy Middle East Limited
7.7 Duration of APA Cover An APA is applicable for a minimum of three – and a maximum of five – tax periods. 7.8 Retroactive Effect for APAs At the initial phase of implementation of the pro - gramme, APAs only cover prospective periods. 8. Penalties and Documentation 8.1 Transfer Pricing Penalties and Defences The UAE does not have penalties that apply specifi - cally in the transfer pricing context, although transfer pricing documentation is required under the Corpo - rate Tax Law, along with a disclosure form to be sub - mitted with the tax return, once relevant thresholds are exceeded. In cases of non-compliance, general corporate tax penalties may apply. General corporate tax penalties may include the fol - lowing, among others. • Penalties for failure to submit the disclosure form as part of the tax return: (a) AED500 for each month, for the first 12 months following the expiry of the period within which the disclosure form must be submitted; and (b) AED1,000 for each month, from the 13th month onwards. • Penalties for failure of the person conducting a business or having a tax obligation under the Tax Procedures Law or Corporate Tax Law to keep the required records and other information specified therein (ie, failure to provide a master file and local file when requested): (a) AED10,000 for each violation; and (b) AED20,000 in each case of repeated viola - tion within 24 months from the date of the last violation. 8.2 Transfer Pricing Documentation The UAE has adopted transfer pricing documentation rules, effective from financial years starting on after 1 June 2023, which follow the three-tiered structure contemplated by the OECD Transfer Pricing Guide - lines. They consist of the master file, the UAE local file and the country-by-country report. Additionally, a dis -
closure form must be completed and filed as part of a taxpayer’s tax return. The conditions and thresholds for maintaining transfer pricing documentation are set out in Ministerial Decision No 97 of 2023. A master file and local file must be prepared when one of the following occur: • the taxpayer is a constituent company of an MNE group with a total consolidated group revenue of at least AED3.15 billion in the relevant tax period; or • the taxpayer’s own revenue for the same period meets or exceeds AED200 million. Master files and local files must be made available to the FTA within 30 days upon request. A taxpayer should include all related-party transac - tions with the following related parties: • a non-resident person; • a person exempt from corporate tax under the Corporate Tax Law; • a resident person who meets the conditions for small business relief in the Corporate Tax Law; and • a resident person whose income is subject to a corporate tax rate different from that of the tax - payer. A taxpayer should not include related-party transac - tions with the following related parties: • a resident person other than those mentioned in the foregoing; • a natural person, provided that the parties’ trans - actions are at arm’s length (ie, the parties are trans - acting in the ordinary course of business, and are not transacting exclusively or almost exclusively with each other – and neither party has control over or provides detailed instruction to the other party); • a company or legal entity that is considered to be a related party or connected person solely by virtue of being a partner in an unincorporated partner - ship, provided that the parties are acting at arm’s length (ie, the parties are transacting in the ordinary course of business, and are not transacting exclu - sively or almost exclusively with each other – and
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