- Legal Foundation: Required under Article 55 of the Corporate Tax Law for reporting transactions with Related Parties and Connected Persons.
- Who Must Submit: All taxable entities engaging in transactions with Related Parties or Connected Persons must submit the form, regardless of unspecified materiality thresholds.
- Deadline for Filing: The form must be submitted with the tax return within nine months after the relevant tax period ends.
- Information Required: The form has three main sections:
- Related Party Schedule: Includes party name, country, transaction type, gross value, TP method, arm’s length value, and tax adjustments.
- Connected Persons Schedule: Details payments to connected persons, including name, relationship, payment type, amount, market value, and tax adjustments.
- Documentation Requirements: Local File, Master File, and Financial Statements.
- Minimum Transaction Value: No defined materiality threshold in the form; further clarification from the FTA is expected.
- Penalties for Non-Compliance: Align with corporate tax return penalties: AED 500/month for the first 12 months, and AED 1,000/month thereafter.
- Form Availability: Integrated into the UAE CT return; accessible close to the deadline. Currently available for taxpayers with a CT return due December 31, 2024.
- Reporting Related Party Transactions: Must include details such as party name, transaction type, and applicable TP method.
- Transaction Types: All types, including goods, services, IP, interest, assets, and liabilities, must be reported.
- Gross Value Reporting: Full gross value of transactions must be reported before adjustments, with discounts reported separately.
- “Others” Category: For transactions that don’t fit defined categories, like cost-sharing arrangements or guarantees.
- Transfer Pricing Methods: Five OECD methods allowed; no “Other Method” option currently available.
- Tax Adjustment Definition: Indicates the difference between actual transaction value and arm’s length value, impacting taxable income.
- Multiple Transactions Reporting: Each transaction type should be reported on separate lines, even for the same Related Party.
- Connected Persons Reporting: Payments to connected persons must be documented with their details and business-related justification.
- Free Zone Transactions: Subject to arm’s length requirements and must be reported accordingly.
- Tax Group Transactions: Internal transactions may not need disclosure, but external transactions must be reported.
- Free-of-Cost Transactions: Book value recorded as zero; arm’s length value must be reported, with tax adjustments calculated.
- Foreign Currency Transactions: Must be converted to AED using applicable exchange rates.
- Documentation Requirements: Local File and Master File may not be needed for entities under specified revenue thresholds; clarification on documentation maintenance is required.
- Non-Monetary Benefits Reporting: Market value should be reported, with a brief description of the benefit and valuation method.
- Liabilities Reporting: Includes loans from Related Parties and payables for goods/services; contingent liabilities like guarantees must also be disclosed.
- Practical Approach: Involves identifying transactions, verifying values, conducting analysis, selecting methods, and assessing arm’s length compliance.
- Key Aspects of Preparation: Include grouping similar transactions, reporting full values, ensuring consistency with the Local File, and conducting arm’s length analysis.
