UAE Trends and Developments Contributed by: Marios Palesis, Theodora Charalambous and Giorgos Kinanis, Kinanis Tax Consultancy Middle East Limited
issued in October 2023, sets out the required contents of the local file and master file. The local file must con - tain detailed and entity-specific information, including: • information on the local entity; • comprehensive details of each material category of controlled transactions in which the entity is involved, including a functional analysis, identifica - tion of the most appropriate transfer pricing meth - od (and the selection of the tested party where relevant) and the application of that method; and • relevant financial information supporting the trans - fer pricing analysis. The master file, by contrast, provides a high-level overview of the MNE group and must cover the fol - lowing main areas: • organisational structure; • description of the MNE group’s business(es); • the MNE group’s intangibles; • the MNE group’s intercompany financial activities; and • the MNE group’s financial and tax positions. The documentation must be prepared by the time the taxable person submits its tax return for the tax peri - od in which the controlled transaction is undertaken. Master files and local files must be made available to the FTA within 30 days upon request. Further to the preparation and maintenance of the master file and local file pursuant to Ministerial Deci - sion No 97 of 2023, the CTGTP1 provides clarification on an additional compliance requirement, namely the disclosure of related-party transactions through the corporate tax return, and specifically the submission of disclosure forms. The Corporate Tax Guide introduces the “Related Party Transaction Schedule” and the “Connected Per - son Schedule”, which operate as formal disclosure mechanisms distinct from the documentation require - ments. The purpose of the Related Party Transaction Schedule is to require taxable persons to disclose high-value transactions with related parties and/or connected persons, as defined under Article 35 of Federal Decree-Law No 47 of 2022.
The obligation to complete the related parties sched - ule arises where the aggregate value of all transactions with all related parties, as recorded in the financial statements or determined at market value, exceeds AED40 million during the relevant tax period. Once this overall threshold is exceeded, further disclosure is required for each transaction category where the aggregate transaction value per category (with all related parties combined) exceeds AED4 million. The obligation to complete the connected persons sched - ule arises where any payments with connected per - sons exceed the amount of AED500,000. This disclosure form requirement constitutes a third pillar of the UAE transfer pricing compliance frame - work, alongside the substantive arm’s length rule under Article 34 and the documentation obligations under Ministerial Decision No 97 of 2023. Unlike the master file and local file, which are maintained and submitted upon request, the disclosure schedule forms part of the corporate tax return and therefore introduces a contemporaneous reporting obligation. As such, it enhances transparency and provides the Federal Tax Authority (FTA) with an initial risk assess - ment tool in respect of related-party dealings. The Transfer Pricing Guide further clarifies that, beyond the master file, local file and disclosure form requirements, two additional compliance layers may arise depending on the size and profile of the taxable person. The first additional requirement concerns the coun - try-by-country report (CbCR). Under BEPS Action 13, the CbCR constitutes the third tier of transfer pricing documentation. In the UAE, CbCR requirements were introduced through Cabinet Resolution No 44 of 2020. The UAE framework applies to MNE groups head - quartered in the UAE with consolidated group revenue equal to or exceeding AED3.15 billion (approximately EUR750 million) during the fiscal year immediately preceding the reporting fiscal year. Under the UAE regime, the ultimate parent entity (UPE) of an in-scope MNE group is required to sub - mit a CbCR notification to the FTA for each reporting fiscal year. The notification must be submitted no later than the last day of the reporting fiscal year and serves
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