Receiving a transfer pricing notification from the UAE Federal Tax Authority (FTA) can be quite daunting. This can happen if this is your first experience of a transfer pricing audit under the new UAE Corporate Tax regime. But with proper planning and clicking, you can navigate your way through it effectively and limit penalties or bonuses.
This guide tells you what you need to do when you receive a transfer pricing notice, the typical triggers and deadlines, and how to respond in order to get ahead of the curve.
What Is a Transfer Pricing Notice?
A transfer pricing notice is a notice from the tax office welcoming you to some kind of review, inquiry or audit in respect of your related party dealings. It could request:
- Additional documents regarding intercompany transactions
- Clarification of pricing methods
- Submission of the forms missed in transfer pricing
- Evidence to support arm’s-length pricing
- Reasons for differences in your return
The FTA may issue notices in cases where your dealings are above the UAE transfer pricing threshold. The disclosures look incomplete, and risk indicators are noticed within your transfer pricing disclosures in tax return.
Stay Calm and Check the Deadline
A transfer pricing notice would typically be made under Article 34 of the Federal Decree-Law No. 47 of Corporate Tax Law and its corresponding Cabinet Decision No.74 regarding Transfer Pricing.
Some deadlines that appear in the notice:
- Transfer pricing disclosure form (with Local File/Master File if ordered) needs to be filed in 30 to 60 days.
- Initial responses or revisions are sometimes able to be made in 10 to 20 days.
Failure to meet the deadline may result in administrative fines of up to AED 50,000 or more if offences are repeated.
Understand Why You Received the Transfer Pricing Notice
The FTA selects cases based on risk indicators such as:
- Related-party transactions which exceed the UAE threshold for transfer pricing purposes (which is AED 50 million for goods/services and AED 30 million for other types of related-party transactions with the same party in a tax period)
- Substantial variance from arm’s length range in your Transfer Pricing disclosures in Tax Return
- Variations between Transfer Pricing disclosure form submitted and annual statement of accounts
- Profitable or consistently losing entities with a few intercompany balances’ parties.
Immediate Actions Required
- Accept/acknowledge the transfer pricing notice on Emara Tax (this is compulsory).
- Appoint an internal point of contact and a transfer pricing advisor/tax agent as soon as possible.
- Pull together all relevant documents:
- Master File and Local File (if the relevance threshold has been reached)
- Signed intercompany agreements
- Benchmarking studies used
- The prescribed form of the executed Transfer Pricing Disclosure Form (Ministry of Finance Form)
- Corporate Tax Return with Transfer Pricing Disclosures in the tax return section
Review Your Transfer Pricing Disclosure Form
The Transfer Pricing Disclosure statement is filed with the Corporate Tax Return if the amount of the related-party transactions exceeds:
- AED 50 million (of goods, services and/or intangibles, etc.) or
- AED 30 million with the related party for some additional transactions
Some of the leading signs of trouble that FTA searches out:
- Writing no as a designation for Local/Master File preparation if the cut-offs are reached obviously
- Blank or inconsistent related party revenue/cost amounts
- Unreasonable / Inappropriate methods of Transfer Pricing adopted.
Prepare Your Transfer Pricing Documentation
- Even if you didn’t make complete Local and Master Files earlier (because you were supposed to be under threshold), now you’re going to have to.
- Within 30 days (and extended for an additional 30-day period) of the delivery, the FTA may request documents. Documenting at the same time can greatly reduce your risk of adjustment.
Draft a Professional Response Letter
Your reply to the transfer pricing demand should comprise:
- Receipt acknowledgement with notice and reference number
- Confirmation of submission timeline
- Related party transactions and transfer pricing methods for applying them
- Offer to schedule a clarification meeting with the FTA auditor
Expect Field Audit Visits or Request for Information
After the filing, FTA may:
- Issue follow-up questions
- Ask for operational interviews of staff involved.
- Visit your premises (announced in advance)
- Train your finance and procurement teams in what they can and cannot say.
How CBM Consultants Supports You in This?
CBM Consultants provides expert support when a business receives a transfer pricing notice or audit by reviewing the notice, identifying compliance gaps, and preparing a complete response for the tax authority. We help gather and organize required documents such as Master File, Local File, benchmarking studies, and intercompany agreements while ensuring all Transfer Pricing disclosures in the tax return are accurate and consistent.
Our professionals analyze your related-party transactions, assess arm’s-length pricing, correct discrepancies, and communicate with the Federal Tax Authority on your behalf. We also guide you in meeting UAE transfer pricing requirements and thresholds, minimizing the risk of penalties. Additionally, our experts strengthen your future compliance with proper documentation, updated pricing policies, and audit-ready reporting.
Strengthen Future Compliance
Once the notice is addressed, improve your processes:
- Maintain annual transfer pricing files
- Review and update intercompany agreements
- Make sure disclosures are consistent on all tax returns
- Impose the arm’s length pricing on all related-party transactions
- Track new changes in UAE Corporate Tax laws
- Proactively complying diminishes chances of future notices or audits.
Conclusion:
Receiving a transfer pricing notice is not unexpected under the UAE Corporate Tax regime. However, timely and appropriate action is important. Despite reading your disclosures, preparing great documents and responding in a professional manner you can navigate the process smoothly. Transfer pricing policies and annual documentation done right to maintain your company audit-ready and contribute to avoiding penalties.
If you have documentation that needs to be prepared or require assistance replying to a notice and regaining compliance, rely on an experienced tax and accounting firm to help with your needs.
