Transfer Pricing
Transfer Pricing
With the introduction of the Corporate Tax regime effective from June 1, 2023, the UAE has also implemented Transfer Pricing regulations. These rules require related party transactions to be conducted at Arm’s Length—meaning the pricing must reflect market value as if the parties were unrelated.
The UAE became a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on May 16, 2018. By joining this framework, the UAE committed to applying BEPS minimum standards, including:
- Transfer Pricing documentation requirements
- Country-by-Country Reporting (CbCR)
What is Transfer Pricing
Transfer Pricing refers to the pricing of goods, services, or intangible assets exchanged between related parties, often called “controlled transactions.” These prices are set internally within a group of associated enterprises.
Examples of controlled transactions include:
- Transfer of physical goods
- Provision of services
- Licensing or transfer of Intellectual Property Rights
In contrast, when unrelated or independent entities conduct business, the transaction value is typically determined by market forces. These are referred to as “uncontrolled transactions,” and the price is considered the “Arm’s Length Price.”
When Does Transfer Pricing Apply?
Transfer Pricing provisions are relevant in the following scenarios:
Within a Single Entity or Group (Domestic Transactions):
- When a business operates multiple departments or divisions that transact with one another
- When management needs to evaluate profitability by division or activity
- When internal transfer of goods or services occurs between divisions for performance measurement
Cross-Border Transactions:
- When goods, services, financial arrangements, or intellectual property are exchanged between entities under common ownership or control, but located in different jurisdictions
By complying with Transfer Pricing regulations, businesses can reduce tax risks and demonstrate transparency in inter-company dealings, both locally and internationally.
How we add Value
At KloVr, we help businesses design, document, and defend their Transfer Pricing policies to ensure full compliance while optimizing global tax efficiency.
Our Transfer Pricing Services include:
- Transfer Pricing Policy Design – Development of an arm’s-length TP framework for intercompany transactions (goods, services, intangibles, and financing arrangements).
- Transfer Pricing Documentation (Master File & Local File) – Preparation and maintenance of documentation in line with UAE Corporate Tax Law and OECD BEPS Action 13 requirements.
- Transfer Pricing Benchmarking Studies – Independent economic and functional analysis using reliable databases to benchmark related-party pricing.
- Related Party Transaction Review – Identification and review of all intercompany transactions to assess TP exposure and compliance obligations.
- Advance Pricing Agreement (APA) Support – Assistance in negotiating and obtaining unilateral or bilateral APAs with tax authorities to gain certainty on pricing outcomes.
- Country-by-Country Reporting (CbCR) Advisory – Guidance on applicability, filing requirements, and maintenance of global group data as per UAE and OECD CbCR standards.
- Transfer Pricing Risk Assessment – Evaluation of existing structures and intercompany arrangements to identify and mitigate compliance risks.
- TP Policy Implementation & Training – Assistance in implementing operational TP mechanisms within ERP systems and training finance teams on documentation and compliance.
- Defense & Audit Support – End-to-end support in responding to FTA queries or audits related to related party pricing and documentation.
- Cross-Border Structuring Advisory – Strategic advice on structuring cross-border flows of goods, services, and capital to achieve both compliance and tax efficiency.