Key Transfer Pricing Considerations On FTA's Guidance For Determining Taxable Income

The Federal Tax Authority (FTA) has issued a comprehensive guide on "Determination of Taxable Income," which provides an overview of the adjustments required to be made to the accounting income for determining taxable income and the Corporate Tax (CT) payable.

Certain key considerations from a transfer pricing perspective while determining the taxable income for UAE CT purposes:

A. Payment to Related Parties/Connected Persons

Chapter X of the UAE CT law governs Transactions with Related Parties and Connected Persons. While Article 34 suggests - "In determining Taxable Income, transactions and arrangements between Related Parties must meet the arm's length standard," Article 36 of the UAE CT law governs "Payments to Connected Persons". According to the FTA guide, all payments and benefits provided by a taxable person to Related Party/Connected Persons should meet a dual test: