Where a business is exposed — and why it matters

Transfer pricing exposure is rarely obvious from the inside. It accumulates in the financing arrangement that was never benchmarked, the intra-group service charge that cannot be substantiated, the transaction category that grew past a disclosure threshold without notice. A risk assessment brings these into view while there remains time to address them, rather than after a position has been filed or an enquiry has begun.

The assessment is diagnostic in nature. We examine the transactions a business has entered into, and those it has disclosed, and measure them against the arm's length principle and the requirements of the UAE regime. The purpose is not to redesign the pricing model, but to establish clearly where the business stands: which positions are well founded, which are exposed, and which warrant attention as a matter of priority.

Related party governance — the framework through which a group sets, documents and monitors its intra-group dealings — has become a distinct focus for tax authorities internationally, and the UAE is no exception. A robust governance framework is now read as evidence of a considered, defensible approach; where a business is exposed, the cause is often as much an absence of governance as an error in pricing.

For significant or complex transactions, an Advance Pricing Agreement offers a route to certainty agreed with the FTA in advance. As the UAE regime matures, an APA can secure the treatment of the arrangements that matter most — and a risk assessment is the natural starting point for identifying where such certainty would be most valuable.

When a risk assessment is most valuable

  • Related party transactions disclosed without formal analysis supporting the positions taken.
  • Uncertainty over whether the business has crossed the disclosure or documentation thresholds, in either direction.
  • The group structure or its intra-group dealings have changed since the position was last considered.
  • Governance over related party transactions is informal, or held by a small number of individuals.

Our approach

We map the group structure and identify the related parties and connected persons; categorise the intra-group transactions across goods, services, financing and intangibles; test their pricing against the arm's length principle at a diagnostic level; and reconcile the position against what the business has already disclosed. The result is a prioritised assessment of exposure, expressed in terms that support a clear decision on what to do next.

The UAE position
  • Framework — Articles 34 to 36, Federal Decree-Law No. 47 of 2022; the arm's length principle applies without threshold
  • Scope of review — Related party and connected person transactions, disclosed positions, and related party governance
  • Deliverable — A prioritised transfer pricing exposure assessment, with recommended next steps