Insights

The General Tax Authority has issued an FAQ on Transfer Pricing

The General Tax Authority (GAT) in Qatar recently issued a Frequently Asked Questions (FAQ) document surrounding the Transfer Pricing (TP) Declaration Form (DF), Master File (MF) and Local File (LF) on the Dhareeba Tax Portal. The FAQ has been attached for ease of reference.

The Chairman of the GTA issued resolution No. 4 of 2020 that provided the applicable thresholds for submission of the DF, MF and LF. As per the resolution the obligation to submit the DF, MF and LF applies to taxable years beginning on or after 1 January 2020.
 

Summary of the FAQ

Definition of associated enterprises

An entity is deemed to be associated to another entity, resident in Qatar or abroad, in the following cases:

  • At the end of the financial year (FY) the reporting entity holds, directly or indirectly, more than half of the capital or voting rights of the other entity directly or indirectly; or
  • more than half of the reporting entity’s capital or its voting rights are held at the end of the FY, directly or indirectly, by the other entity.
DF
  • The DF must be filed along with the annual corporate income tax return.
  • Entities resident in Qatar must submit a TP DF when they meet both the following conditions:
    • The total turnover OR total assets as the financial statement equals to or exceeds QR. 10,000,000 in the financial year.
    • these entities are associated to other entities established in Qatar or abroad.
  • The DF should contain details of transactions with one of more associated enterprises when the amount of the transactions aggregated exceeds QAR 200,000 for the year.
  • For determining the thresholds of QAR 200,000 the revenues and expenses should not be netted.
MF and LF
  • Entities resident in the state and permanent establishments are required to submit a MF and LF if they fulfil both of the following conditions:
    • The total turnover OR total assets as the financial statement equals to or exceeds QR. 50,000,000 in the financial year.
    • If one of the group entities resides outside the State of Qatar.
  • Entities which do not carry out any transactions with related entities resident abroad may submit a “nil” declaration for the MF and LF.
  • The LF focuses on material transactions between a Qatari entity and its associated enterprises in different countries.
  • The following categories of transactions should be considered in the LF:
    • Revenues: sales of goods, provision of services, commissions, royalties, performance guarantees, financial guarantees, financial products, other products.
    • Charges: purchases of goods or services, commissions, fees, performance guarantees, financial guarantees, financial charges, other charges.
Purpose of the TP documentation
  • The MF and the LF will require taxpayers to articulate consistent TP positions.
  • These will provide the GTA with useful information to assess TP risks so that GTA resources can be effectively be deployed.
  • In the event of an audits, the TP documentation will provide information to the GTA to commence and target audit enquiries. 


Key takeaways

  • The GTA reiterates that the TP documentation should be prepared on a contemporaneous basis i.e. documentation should be prepared at the time of the transaction or before the filing of the income tax return.
  • As per the FAQ, contemporaneous documentation requirements will help to ensure the integrity of taxpayers’ positions instead of taxpayers developing justifications for their positions after the fact.
  • Entities that are not obligated to submit LF and MF are obliged to provide information and documents about material cross-border transactions upon a specific request from the GTA in the course of a tax examination or for Transfer Pricing risk assessment purposes.

Robust Transfer Pricing documentation would be key to defending the taxpayer’s
position.

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