The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
With the introduction of UAE Corporate Tax, the country’s tax system has changed dramatically. Businesses with related-party transactions must now comply with strict transfer pricing rules set by the Federal Tax Authority (FTA).
One of the most important compliance tools is the benchmarking study for transfer pricing UAE, a process that proves your intercompany transactions are conducted at arm’s length. This means the prices are fair and comparable to what independent businesses would agree upon in the open market.
In this guide, you’ll learn why benchmarking studies are essential, the key steps involved, and how they can be both a compliance requirement and a strategic advantage for your business.
Why a Benchmarking Study is Essential?
1. Compliance with UAE Corporate Tax
The FTA requires that all related-party and connected person transactions follow the arm’s length principle. A benchmarking study provides the evidence needed to demonstrate this compliance, forming a crucial part of transfer pricing documentation.
2. Risk Mitigation
A thorough, well-prepared benchmarking study helps protect your business from:
- Severe penalties for non-compliance
- Tax adjustments that increase your liability
- Lengthy disputes with the FTA during audits
It gives you a strong, defensible position backed by reliable market data.
3. Strategic Business Advantage
Beyond compliance, a benchmarking study can:
- Reveal market pricing trends
- Provide insights into competitor performance
- Help optimize your internal value chain
- Guide smarter pricing and operational decisions
The Steps of a Benchmarking Study
At Reyson Badger, we follow a structured, transparent process to ensure your benchmarking study is accurate, defensible, and fully compliant.
Step 1: Functional Analysis
We identify the functions performed, assets used, and risks assumed by each party in your intercompany transactions. This analysis is critical to selecting suitable comparable.
Step 2: Selecting the Right Transfer Pricing Method
We determine the most appropriate method, such as:
- Comparable Uncontrolled Price (CUP)
- Transactional Net Margin Method (TNMM)
- Resale Price Method (RPM)
The choice depends on the nature and complexity of your transaction.
Step 3: Finding Comparable Companies
Using trusted commercial databases, we identify independent companies engaged in similar activities. UAE guidelines recommend prioritizing local or regional comparables before considering international data.
Step 4: Financial Analysis & Documentation
We analyze the financial data of the comparable companies to determine an arm’s length range. The entire process is then documented in a comprehensive report, which is a mandatory component of transfer pricing documentation in the UAE.
Why Choose Reyson Badger for Your Benchmarking Study?
- Global Transfer Pricing Expertise with deep UAE regulatory knowledge
- Industry-specific benchmarking tailored to your business model
- Robust documentation that withstands FTA scrutiny
- End-to-end support from functional analysis to audit defense
- Proactive compliance approach that also delivers strategic insights
Get It Right, Stay Compliant, and Gain a Competitive Edge
In the UAE’s new corporate tax environment, a benchmarking study for transfer pricing is more than just a regulatory requirement it’s a core element of your tax strategy. It safeguards your business from compliance risks while helping you make better pricing and operational decisions. Given the complexity and importance of the process, partnering with experienced professionals is the smartest move you can make.
Contact Reyson Badger Today
Ensure your transfer pricing stands up to scrutiny and supports your business growth. Contact Reyson Badger for a Free Transfer Pricing Consultation.
