Transfer pricing in Dubai is an accounting technique that refers to the cost that companies within the same group charge each other for the replacement of services and goods. It shows the market price of the service or good. Transfer pricing is widely used by multinational establishments as a method of offering profits to each other for tax purposes.
These services are offered by the professional service provider, who assists the businesses to follow up on the transfer pricing regulations and manage their intercompany cost management. It is all about the process of determining the prices at which services, goods, or subtle assets are exchanged in the middle of linked entities within a multinational company.
What is the process for transferring the set price?
According to the rules set by ‘The Organisation for Economic Co-operation and Development, the transfer price between group entities should show the market cost taken by a third party. It can also be negotiated according to the Arm’s Length Principle, completely based on the analysis of the range of actual market costs of goods and services in a country.
It allows an individual global standard for transfer pricing and tax calculation. At the same time, it makes sure that the governments can easily measure their taxes while giving multinational corporations the benefit of getting rid of double taxation.
What is the formula used for transfer pricing?
There is a specific transfer pricing formula being used by the experts to assess the price:
Transfer Price = Outlay Cost + Opportunity Cost
The service providers calculate the least acceptable transfer price as equal to the changeable cost. It is even called the marginal or outlay cost. Here, the marginal cost is defined as the complete extra cost collected from producing an extra unit of a product or even a service.
On the other hand, when it comes to the common economic transfer price rule, the companies measure the least fixed transfer cost, which is equal to the outlay cost along with the cost of an opportunity.
Here, the ‘opportunity cost’ is used for the profit the division would create by selling the service or good directly in the marketplace as compared to selling it to an interior separation.
Reasons for the Transfer Pricing Terms Follow-Up in the UAE
The UAE is covered by oil revenues and has seen a stunning economic increase in the past couple of years. It helps the country transform into a fruitful commercial and economic hub and grabs the attention of foreign investors.
To give new edges to the commercial market in the UAE, the Ministry of Finance (MoF) has introduced the Federal Corporate Tax (CT). This tax is imposed on corporations that have started their business within financial years after June 1, 2023. Businesses in the UAE need to follow up on the transfer pricing regulations and documentation needs established according to the UAE’s OECD Transfer Pricing Terms.
Why hire Transfer Pricing Services in the UAE?
There are several reasons why you need to hire these services in the UAE. Let’s discuss some of them:
Transfer Pricing Documentation
The service providers are supporting the companies in Dubai in preparing documentation to follow the local rules. They share proof of their intercompany costs directly on the papers.
Transfer Pricing Planning
No doubt, result-oriented transfer pricing is essential to developing a business. It aligns their global business operations while cutting down on the possibility of risks.
Transfer Pricing Compliance
It makes sure the companies meet the required regulatory compliance needs linked to the transfer pricing.
Assessment of Transfer Pricing Risk
Assessment and finding out the future risks related to transfer pricing to cut down the chances of disagreements with the tax authorities.
Advance Pricing Agreements (APAs)
These services can also assist in making the required negotiations with tax authorities to set up transfer pricing techniques in advance, giving surety to multinational firms.
Comparability Analysis
It is important to carry out in-depth analyses to find comparable companies and transactions for benchmarking ideas.
Profit Split Method Analysis
The service offered by the professional examines and uses the profit split technique when the involvement of each linked party in the transaction cannot be constantly determined through various transfer pricing approaches.
Dispute Resolution Related to the Transfer Pricing
The service provider speaks for their clients in transfer pricing audits and disputes with tax authorities, giving professional support and opinions.
Global Transfer Pricing Paperwork Management:
The team of professionals helps with friendly transfer pricing documentation across different jurisdictions. They give surety for compliance and consistency by following up with the local regulations.
Transfer Pricing Training and Education
The professional team gives special training sessions and workshops to assist the company’s employees in getting a better understanding of transfer pricing concepts and needs.
It is quite important for the multinational organisation doing business in Dubai to execute suitable transfer pricing practices. It is one of the best ways to avoid unexpected penalties in the way of taxes, legal issues, and reputational risks. Several organisations look for the support of proficient transfer pricing service providers to fight the difficulties of transfer pricing regulations. It also makes sure to follow up on suitable tax laws in different jurisdictions.
Essential for Risk Management
To run a business without any difficulty, it is important to have properly structured transfer pricing to reduce the possibility of disputes with the legal tax authorities. Following up on the right and properly documented transfer pricing policies, companies can reveal fulfilment with the principle of arm’s length and cut down on the possibilities of audits and penalties required to be paid in case of default.
If you are new to transfer pricing services, it is better to contact the Transfer Pricing Services team for more information. Looking for expert advice and performing regular transfer pricing audits can assist companies in maintaining compliance and managing their global operations.
The collection of suitable information related to the Transfer Pricing Services in Dubai is important for running the business successfully.
