Transfer pricing policy: why it deserves your attention ?

Most of our clients are currently completing their transfer pricing compliance framework in the UAE. They are refining intercompany agreements, running annual benchmarking studies, preparing TP documentation and making TP disclosures in their Tax Returns. Yet these documents often stand apart, with little connecting them: nothing records why a method was chosen, who approves the price, or whether practice matches the paperwork.

The law does not require a separate document called a “policy”, but both the FTA and the OECD refer directly to transfer pricing policies. The FTA expects documentation to demonstrate that a taxpayer’s policies comply with the arm’s length principle. The OECD treats documentation as the place where a taxpayer explains the basis for its pricing policies, and expects groups to describe those policies in the Master File. Without a written policy, this content has to be rebuilt from scratch every time: for the Tax Return, for the Master File and Local File, and for reasonable records.

We help clients prepare a transfer pricing policy: define the scope of transactions, select and justify methods, set the approach to benchmarking, and align intercompany agreements with actual practice. A policy is best prepared in advance, not after an FTA request.

Read more in the full alert here.