The GTA provides clarity on Transfer Pricing reporting requirements in Qatar has been saved
The GTA provides clarity on Transfer Pricing reporting requirements in Qatar
On Tuesday, 2 February, 2021, the General Tax Authority (GTA) in Qatar held a webinar where they provided additional clarification surrounding the Transfer Pricing (TP) Disclosure Form, Master file (MF) and Local file (LF) submission requirements.
TP reporting requirements were highlighted in the Executive Regulations issued in December 2019 which stated that the GTA would issue guidance regarding the applicable thresholds for TP Disclosure Forms, Master file and Local file submissions.
Based on the recently issued guidance, the obligation to submit Disclosure Forms, Master file and Local file submissions applies to taxable years beginning on or after 1 January, 2020.
The Income tax return to be filed for the fiscal year (FY) 2020 will include the TP Disclosure if the entity has either domestic or international related party transactions, and the Qatar entity has assets or revenues of more than 10 Million QR for FY 2020.
Summary of TP requirements
TP Disclosure Form
- Resident entities and permanent establishments in the state of Qatar are required to submit a TP Disclosure Form if they have undertaken domestic or international related party transactions and the total turnover OR total assets in the financial year equals to or exceeds QR 10,000,000.
- The TP Disclosure Form/Statement must be filed on the same day specified for filing the annual corporate income tax return.
- The TP Disclosure Form/Statement includes the following information:
- General overview of the activities performed by the group.
- List of major intangible assets owned or used by the resident entity and country of related parties that own these intangibles.
- General description of the group TP policy.
- Information about the associated enterprise including country, amount of transaction, and TP method used.
- A brief statement with details of the nature of the transactions, the amount of the transactions and the country of the related parties if the aggregate value of transactions with related entities exceeds QR 200,000.
- Resident entities and permanent establishments in Qatar are required to submit Master file to the GTA on request.
- The contents of the Master file are in line with the Organization for Economic Co-operation and Development (OECD) recommendations.
- As per the OECD recommendations, the following information needs to be included in the Master file:
- A high-level overview of a company’s business operations, description of the groups 5 largest supply chain products or services, as well as service agreements between group entities;
- Main geographical markets and functional analysis describing the principal contributions to value creation by individual entities within the group;
- Significant transactions related to business restructuring, acquisitions and divestment operation; and
- TP policies and information about intangibles owned by group entities, intercompany financial activities, and financial and tax positions.
- Resident entities and permanent establishments in Qatar are required to submit Local file to the GTA on request.
- The contents of the Local file are in line with the OECD recommendations.
- As per the OECD recommendations, the following information needs to be included in the Local file:
- A description of the management structure of the local entity, a local organization chart, business strategy, whether the resident entity participated in business restructuring operations or transfers of intangible assets and information about the main competitors;
- Description of the material controlled transactions (e.g. procurement of manufacturing services, purchase of goods, provision of services, loans, financial and performance guarantees, licenses of intangibles, etc.);
- A functional analysis, copy of intercompany agreements, and TP methods;
- Information about bilateral advanced pricing agreements (APAs) and tax rulings; and
- A financial statement of the local entity, a schedule of the relevant financial data for comparable used in TP analysis and the sources from which that data was obtained.
- The filing of the TP Disclosure Form applies to taxable years beginning on or after 1 January, 2020 and must to be submitted along with the annual corporate income tax return.
- The obligation to maintain Master file and Local file applies to taxable years beginning on or after 1 January, 2020.
- As per the GTA, entities that have related party transactions should have TP documentation in place for FY2020 onwards.
- As per the clarification issued by the GTA and consistent with the Executive Regulations, the GTA requires details of all related party (domestic and cross-border) transactions in the TP Disclosure Form.
- The Local file requires taxpayers to include Information and allocation schedules showing how the financial data used in applying the TP method may be tied to the annual financial statements. This would require accurate implementation of the TP policy so that the same can be aligned with the financial statement.
- The Executive Regulations state that in case data required to apply the Unrelated Comparable Price method is not available, the taxpayer must submit an application to the GTA to apply for any other pricing method approved by the OECD. Further guidance from the GTA on the process for obtaining such approval would provide greater clarity to taxpayers that use one of the other OECD recommended methods.
- Taxpayers with a 31 December 2020 fiscal year end should begin to work towards the 30 April 2021 deadline to ensure all information required for the Disclosure Form is gathered and validated.
- The guidance issued by the GTA provides taxpayers with clarity on their TP compliance obligations.