The UAE Transfer Pricing Master File

The Master File is one of the most important and complex documents in an MNE’s transfer-pricing framework. It requires detailed preparation and cannot sensibly be produced at short notice. Gathering and analysing the information should be an ongoing process so that it can be supplied within the FTA’s 30-day deadline.

What is a Master File?

The Master File provides a high-level overview of a multinational enterprise’s transfer-pricing policies. It sits alongside the Local File and country-by-country report in the OECD’s three-tier approach to standardised documentation.

Following the OECD guidance in Annex II to Chapter V, the UAE introduced Ministerial Decision No. 97 of 2023. The Master File is the second tier, after the Local File, and gives the FTA a group-wide view of an MNE.

It assists the FTA in evaluating significant transfer-pricing risks and understanding the group’s practices in their global economic, legal, financial and tax context. In effect, it is a blueprint of the group’s operations, transfer-pricing policies, key value drivers, and the global allocation of income and economic activity.

When is a Master File required?

A UAE taxable person must maintain both a Master File and Local File where either of the following applies:

1. During the relevant tax period, it is a constituent company of an MNE group — as defined in Cabinet Resolution No. 44 of 2020 — whose total consolidated group revenue is at least AED 3.15 billion.
2. The UAE taxable person’s own revenue in the relevant tax period is at least AED 200 million.

Exemptions

A taxable person below both thresholds is not required to maintain a Master File or Local File. It must nevertheless keep reasonable records supporting the arm’s-length nature of its transactions with related parties and connected persons, and should be prepared to provide that information within 30 days of an FTA request.

A member of a UAE-headquartered group that has no business establishments outside the UAE is not required to maintain a Master File. It may still need a Local File if it meets or exceeds the relevant threshold.

What the Master File covers

Organisational structure

The organisational chart should illustrate the MNE group’s legal and ownership structure and the geographical location of every operating entity.

Business description

1. Important drivers of business profit.
2. Supply-chain diagrams for the five largest products or services.
3. Intra-group service arrangements.
4. Capabilities of the group’s principal locations.
5. Transfer-pricing policies for intra-group services.
6. Principal geographic markets.
7. A functional analysis of group entities’ contributions to value creation.
8. Important restructurings, acquisitions and divestitures during the year.

Intangibles

1. The group strategy for developing, owning and exploiting intangibles, including principal R&D and management locations.
2. A list of intangibles and R&D assets with their legal owners.
3. Cost-contribution, service and licence agreements.
4. The transfer-pricing policy for intangibles and R&D.
5. Recent transfers of interests in intangibles, including the entities, countries and costs involved.

Financial transactions

1. Copies of all relevant policies.
2. Copies of third-party arrangements.
3. Identification of group members providing central financial functions.
4. The countries in which those group members were formed.

Financial position

The file should include the allocation of tax, annual consolidated financial statements, unilateral advance-pricing agreements, and relevant tax rulings.

Presentation by line of business

The FTA’s October 2023 Transfer Pricing Guide permits presentation by line of business where the facts justify it — for example, where significant business lines operate largely independently or were recently acquired.

Where this approach is used, centralised group functions and transactions between business lines must still be properly described. The complete Master File, covering every business line, should remain available to each jurisdiction so that it provides an appropriate overview of the MNE group’s global business.