UAE corporate tax: Transfer pricing benchmarking helps set fair market prices

UAE corporate tax: Transfer pricing benchmarking helps set fair market prices

Provision ensures that the price of a transaction is not influenced by the relationship between the parties involved

By Mahar Afzal Published: Sun 27 Aug 2023, 3:40 PM Last updated: Sun 27 Aug 2023, 3:41 PM

Transfer price refers to the prices of goods and services charged on transactions between the related parties and with the connected persons (owner, director, officer, or 4th degree of kinship of owner, director, officer of taxable person). like A Ltd and B Ltd are owned by Mr X, and the price charged by A Ltd to B Ltd, or vice versa on the sales of goods and services between them refers to the transfer price.

The key risk associated with the transactions between related parties, and with the connected persons is that the owner or the person in control can manage the transaction price between the related parties; or connected parties, which will help them to shift their taxable profits from high tax jurisdiction to the low tax jurisdiction; or reduce their taxable profits in the same tax jurisdiction which will ultimately help them to pay the lesser tax.

For example, A Ltd is in the United Kingdom (UK) where the corporate tax rate is 19 per cent,