UAE Transfer Pricing Guidance for German Corporate Groups

Map the transactions before choosing a method

The review begins with the parties, their relationships and the transactions undertaken during the period. A balance-sheet receivable does not explain whether it arose from goods, services, funding or an unpaid reimbursement. We help management assemble a transaction map and identify the agreements and calculations that support each stream.

German groups may already have a global transfer-pricing policy. That policy is useful context, but the UAE entity's actual role must be examined. If local staff now manage customers, hold inventory or assume responsibilities not reflected in the policy, the historical description may no longer be adequate.

Understand functions, assets and risks

A functional analysis considers what each party does, the assets it uses and the risks it controls or bears. Job titles and contractual labels alone do not establish the answer. Interviews and operational evidence help explain where decisions are made and how the business responds when a risk materialises.

Consider a UAE distributor purchasing German products. Its pricing analysis may depend on whether it owns stock, grants customer credit, performs installation or merely introduces buyers. Those differences can affect the selection of an appropriate approach. We avoid treating every German-owned sales company as the same type of distributor.

Connect the policy to the numbers

The chosen analysis needs financial information that matches the transactions under review. Segmented results may be necessary where a UAE company carries out several activities. Costs included in a service recharge should be identifiable, and the allocation basis should have a documented rationale.

Year-end true-ups require particular care. Management should understand what the adjustment is intended to achieve, how it was calculated and whether contracts and invoicing support it. A journal that makes the final margin match a target does not, on its own, establish that the underlying arrangement is appropriately priced.

Coordinate the UAE and German records

The same transaction may be described in the group's master documentation, local agreements and UAE return schedules. These descriptions should be consistent with the facts and with each other. Differences should be investigated rather than concealed through different wording in different countries.

Documentation and disclosure obligations depend on the applicable rules and the group's circumstances. We assess the required work instead of assuming that every business needs an identical report. The German adviser should review German requirements, while the UAE work addresses the local position and the information needed for it.

Prepare for a proportionate review

Provide the ownership chart, intercompany transaction listing, existing policy, agreements and financial statements. Explain changes in the UAE team's role or the group's supply chain. If there is no written agreement, describe how the arrangement operates and what evidence exists.

The initial output can identify transaction categories, documentation gaps and the next analysis required. Benchmarking, financial modelling and formal documentation can then be scoped around the material issues. Transfer pricing is not a mechanism for choosing an arbitrary tax result; it requires a supported account of the group's actual dealings.

Map transactions before selecting a documentation approach

Start with a list of related parties and the transactions recorded with each one. Sales of goods, service charges, financing and use of intellectual property can involve different questions. Combining them into one intercompany account may conceal information needed to understand the arrangement.

For each category, record the agreement, amount, business purpose and people responsible for the activity. A German parent may have a group policy, but the UAE entity's actual functions and evidence still need to be understood. A policy written for a different business model should not be adopted without checking how closely it matches local operations.

The initial review can identify which transactions need deeper analysis and which records are missing. Any method, comparison or documentation requirement should be assessed against the applicable rules and facts. A general statement that a group uses market prices is not a substitute for support that explains how the price was established.

Management should also decide who maintains the transaction list when the business changes. A new loan, service arrangement or acquisition may not appear in last year's documentation. Keeping an updated inventory makes it easier to scope the next review and reduces the chance that a material arrangement is discovered only when the annual return is being prepared. Detailed documentation assistance is addressed separately from this overview.

Related support for German businesses

• Transfer Pricing Documentation
• Corporate Tax Return Filing

Discuss your UAE requirements

Tell our Dubai team about your German business, UAE entity and the support you need. We will confirm the scope, required records and next steps before work begins. German tax filings and legal opinions require an appropriately qualified German adviser.