Transfer pricing has long been about getting the price right. But under UAE QDMTT (Cabinet Decision No. 142 of 2024), even an arm’s length transaction can lead to top-up tax if it distorts the jurisdictional ETR of the UAE.
Here are five practical scenarios where compliant transfer pricing quietly turns into a QDMTT risk:
𝗟𝗼𝘄𝗲𝗿 𝗤𝘂𝗮𝗿𝘁𝗶𝗹𝗲 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 𝗳𝗼𝗿 𝗜𝗻𝗰𝗼𝗺𝗲, 𝗨𝗽𝗽𝗲𝗿 𝗤𝘂𝗮𝗿𝘁𝗶𝗹𝗲 𝗳𝗼𝗿 𝗘𝘅𝗽𝗲𝗻𝘀𝗲:
Using the acceptable range is standard TP logic. But if inbound service fees to UAE are priced at the upper quartile and outbound sales at the lower quartile – both arm’s length – GloBE income deflates, ETR drops, and a QDMTT liability arises. A tax authority median adjustment could change everything.
𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗙𝗲𝗲𝘀 𝗳𝗿𝗼𝗺 𝗤𝗙𝗭𝗣𝘀 𝘁𝗼 𝗠𝗮𝗶𝗻𝗹𝗮𝗻𝗱:
Mainland entity pays 100 for central services. The QFZP receives 0% tax. No issue under UAE CT law — but under QDMTT, this depresses the mainland’s income and the jurisdictional ETR for UAE.
𝗜𝗣 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗶𝗻𝗴 𝗧𝗵𝗮𝘁 𝗦𝗸𝗲𝘄𝘀 𝗗𝗘𝗠𝗣𝗘 𝗙𝘂𝗻𝗰𝘁𝗶𝗼𝗻𝘀 𝗔𝗯𝗿𝗼𝗮𝗱:
Even if a UAE entity pays fair royalties to a foreign IP owner, it may still lower GloBE income locally with no matching Covered Tax in the UAE (No WHT). Outcome? A QDMTT exposure driven by TP design, not abuse.
𝗧𝗿𝗮𝗻𝘀𝗳𝗲𝗿 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗦𝘂𝗯𝘀𝘁𝗮𝗻𝗰𝗲-𝗕𝗮𝘀𝗲𝗱 𝗖𝗮𝗿𝘃𝗲-𝗢𝘂𝘁 𝗗𝗶𝘀𝗰𝗼𝗻𝗻𝗲𝗰𝘁:
Substance-based carve-outs in QDMTT reduce the Excess Profit subject to top-up tax based on UAE payroll and tangible assets. But TP policies that outsource key functions or allocate economic ownership to offshore affiliates — even if defensible — may cause minimal eligible carve-out.
𝗥𝗲𝗰𝗵𝗮𝗿𝗴𝗲𝘀 𝘁𝗼 𝗟𝗼𝘀𝘀-𝗠𝗮𝗸𝗶𝗻𝗴 𝗨𝗔𝗘 𝗖𝗘𝘀:
When TP recharges are allocated to UAE entities with tax losses (or minimal income), they erode the jurisdictional GloBE base without raising covered taxes again pushing the effective rate down and inviting QDMTT.
𝗕𝗼𝘁𝘁𝗼𝗺 𝗟𝗶𝗻𝗲: QDMTT forces MNEs to rethink transfer pricing not just through the lens of price fairness, but through the ETR optics of each jurisdiction. Precision is no longer enough — alignment is the new compliance.
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