Understanding the Prerequisites for Maintaining Master File and Local File to Comply with Corporate Tax Law

To adhere to the Corporate Tax Law, it is necessary to understand the prerequisites for maintaining the Master File and Local File.

Requirements for Maintaining Master File and Local File:

During the relevant Tax Period, a Taxable Person must satisfy one of the following criteria:

a) They are a Constituent Company within a Multinational Enterprises Group that possesses a total consolidated group Revenue of AED 3,150,000,000 or more.

b) They have generated Revenue of AED 200,000,000 or more.

Inclusion in the Local File:

The Taxable Person must include transactions or arrangements involving the following entities:

a) Non-Resident Persons.

b) Exempt Persons.

c) Resident Persons who have made an election under Article (21) of the Corporate Tax Law and meet the prescribed conditions for such election.

d) Resident Persons whose income is subjected to a different Corporate Tax rate than that applicable to the Taxable Person's income.

Exclusion from the Local File:

The Taxable Person should exclude transactions or arrangements involving the following entities:

a) Resident Persons other than those specifically mentioned.

b) Natural persons when the parties operate independently of each other.

c) Juridical persons regarded as Related Parties or Connected Persons solely due to being a partner in an Unincorporated Partnership, when the parties act independently of each other.

d) Permanent Establishments of Non-Resident Persons within the State with the same Corporate Tax rate as the Taxable Person's income.

Conditions for Independent Parties:

Parties are considered independent of each other if:

a) The transaction or arrangement is conducted in the regular course of business.

b) Parties are not exclusively or almost exclusively engaged in transactions with each other.

Influence on Independence:

Parties involved in the transaction or arrangement will not be considered independent if one party's activities are subject to detailed instructions or comprehensive control by the other party.

Guidelines by the Authority:

The Authority will release guidelines for implementing the provisions mentioned in this Decision and maintaining transfer pricing documentation.

By fulfilling the aforementioned requirements and conditions, the Taxable Person can ensure compliance with FTA regulations, thereby avoiding potential penalties or fines.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.