Answer:
As a general rule, transactions between members of a Tax Group do not need to comply with transfer pricing rules. This is because the financial results, assets, and liabilities of all members are consolidated at the group level, and intra-group transactions are eliminated when determining the Taxable Income of the Tax Group.
(Article 34 and Article 42 of Federal Decree-Law No. 47 of 2022)
However, transfer pricing rules still apply in specific cases, such as:
- When a member leaves the Tax Group and must calculate its standalone Taxable Income.
- When a member utilizes pre-grouping Tax Losses (i.e., losses incurred before joining the Tax Group).
- In other circumstances requiring separate entity reporting or cost base adjustments (e.g., within 2 years of an intra-group asset transfer if one member leaves the group).
Example:
Company A and Company B form a Tax Group. Transactions between them (e.g., sale of goods) are ignored for Corporate Tax purposes.
If Company B later leaves the Tax Group, the FTA may require transfer pricing compliance to reassess the arm’s length nature of previous tr...