Federal Experts Consultancy

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FAQ’S TRANSFER PRICING DECLARATION

 

I. Scope of the transfer pricing Declaration requirement

Q1. What is the scope of the reporting obligation under Article 56 of the Executive Regulations of the Income Tax Law?

In accordance with the provisions of Article 56 of the Executive Regulations (ERs) of the Income Tax Law (ITL) and Articles 2 and 3 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 of July 16, 2020 relating to the transfer pricing (TP) declaration and the master and local files, entities resident in Qatar must submit a declaration relating to their TP when they meet the following conditions:

  • the annual tax-free turnover of these entities or the gross assets appearing on their balance sheet is greater than or equal to QAR10,000,000; and
  • these entities are associated to other entities established in Qatar or abroad.

Important:

  1. For the purposes of applying the aforementioned provisions, an entity is deemed to be associated to another entity, resident in Qatar or abroad, in the following cases:
  • the reporting entity holds, at the end of the financial year (FY), directly or indirectly, more than half of the capital or voting rights of the other entity; or
  • more than half of the reporting entity’s capital or of its voting rights is held, at the end of the FY, directly or indirectly, by the other entity.
  1. Entities which do not carry out any transactions with related entities resident in Qatar or abroad may submit a “nil”
  2. The reporting obligation described above also applies to foreign entities having a permanent establishment (PE) in Qatar, being specified in this case that the conditions mentioned above will be considered as satisfied if they are fulfilled at the level of the PE in

II. Deadline and method of filing the transfer pricing declaration

Q2. What is the deadline for filing the transfer pricing declaration?

 The transfer pricing (TP) declaration must be filed with the income tax (IT) return, in accordance with Article 56 of the Executive Regulations (ERs) of the Income Tax Law (ITL) and Article 4 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 of July 16, 2020 on the TP declaration and the master and local files.

Example:

Entities whose fiscal year (FY) coincides with the calendar year must file their IT return no later than April 30 of the following calendar year, in accordance with Paragraph 1 of Article 29 of

the ITL’s ERs.

The TP reporting obligation must therefore be satisfied when filing the IT return.

The TP declaration must therefore be filed with the IT return.

For this purpose, the reporting entities must use the declaration available online on the Dhareeba site.

III.      Content of the transfer pricing declaration

Q3. What does the transfer pricing declaration contain?

 The TP declaration referred to in Article 56 of the Executive Regulations (ERs) of the Income Tax Law (ITL) is a light version of the master file and the local file that some entities must file with the General Tax Authority (GTA), in accordance with Article 57 of the ITL’s ERs.

Two categories of information must be declared:

  • general information on the group of related entities; and
  • specific information on the reporting

IV. General information about the group of related entities 

Q4. What does the general description of the group’s activity contain?

In accordance with Sub-paragraph (a) of Paragraph 1 of Article 5 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 on the Transfer Pricing (TP) Declaration, the Master File and the Local File, this description is intended to identify the main activities of the group, including the changes that have occurred during the fiscal year (FY), as well as the nature and location of the intangible assets exploited.

The main character of an activity is assessed with regard to the importance of the revenues generated or the importance of the means implemented.

Q5. What are the intangible assets that should be mentioned in the intangible assets table?

 In accordance with Sub-paragraph (b) of Paragraph 1 of Article 5 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 on the Transfer Pricing (TP) Declaration, the Master File and the Local File, the intangible assets to be mentioned in this part of the TP declaration must meet two cumulative conditions:

  1. have a principal character for the group: the principal character of an intangible asset is assessed with regard to the importance of its contribution to the group’s activity;
  2. be connected to the reporting entity: consequently, must be mentioned:
    • the main intangible assets owned by the reporting entity, whether or not they are used;
    • the main intangible assets which the reporting entity does not own, but which it uses in the course of its

The state or territory of the establishment of the entity that owns or co-owns the intangible asset must be mentioned.

Example:

A company headquartered in Germany owns a patent made available to a Qatari related entity in exchange for the payment of a royalty.

The nature of the asset must be mentioned in the table provided for this purpose in the TP declaration.

The state in which the entity owning the patent is located (Germany) should also be indicated.

Assets used by or available to the reporting entity that are held by an unrelated entity do not need to be reported.

Q6. What is the group’s transfer pricing policy that the reporting entity should indicate?

 In accordance with Sub-paragraph (c) of Paragraph 1 of Article 5 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 on the Transfer Pricing (TP) Declaration, the Master File and the Local File, the reporting entity must indicate, from the drop-down list provided for this purpose, the TP methodology(ies) used by the group and which are related to the reporting entity, that is to say the method or methods which exert an influence on the determination of the amount of intra-group transactions in which the reporting entity is involved.

V. Specific information on the reporting entity

Q7. What does the summary of transactions carried out with other related entities contain?

 In accordance with Sub-paragraph (b) of Paragraph 2 of Article 5 of the Decision of the President of the General Tax Authority (GTA) No. 4 of the year 2020 on the Transfer Pricing (TP) Declaration, the Master File and the Local File, the amounts to be entered in this part of the transfer pricing (TP) declaration are those derived from the accounting of the reporting entity.

The reporting entity must disclose the aggregate amount of sales and purchases of goods and services, as well as acquisitions and disposals of assets, which it recorded for the reporting fiscal year, by nature and by amount, when the aggregate amount of transactions exceeds QAR200,000.

To determine the threshold of QAR200,000, no compensation between revenues and expenses can be made, as these transactions are of a different nature.

It is not necessary to indicate, for each type of flow, the full detail of all the transactions which make it possible to reach the amount of QAR200,000.

Only one amount must be mentioned for each type of transaction per related entity’s jurisdiction on residence.

Example 1:

If 10 services are rendered to a related entity for an amount of QAR22,000 each, only the amount of QAR220,000 will be indicated, and not the details of each transaction at QAR22,000.

Example 2:

A company is manufacturing a product in Qatar.

This product is sold to a related entity established in Spain.

The total amount of sales to the Spanish entity is QAR500,000,000.

The reporting entity is not required to detail the revenues derived from that related entity.

The reporting entity only needs to report the total amount of sales, which is QAR500,000,000.

All transactions must be broken down by type, in accordance with the dropdown list provided for that purpose.

The states or territories where related entities are located with which the transactions are carried out must be mentioned in the summary statement for each type of flow reported.

Q8. How should mixed transactions be reported?

 In the case of mixed transactions, such as the sale of goods together with the provision of services (for example, maintenance services), the transfer pricing (TP) declaration should reflect the accounting method used by the reporting entity for these transactions.

The reporting entity may therefore be required to report these items in two different categories (goods and services) or in one of the two categories.

Q9. What are the amounts to be reported under the headings “acquisitions of assets” and “disposals of assets”?

 The amounts that must be declared correspond to the gross amount of the purchase prices and the selling prices of the assets concerned, and not to the capital gains or losses.

Q10. Do the name and address of the related entities have to be reported?

 It is not necessary to indicate the name and address of the related entities.

Only the states or territories of the related entities involved in the transactions should be mentioned.

Q11. How are the transfer pricing methods of reported transactions identified?

 With regard to the transfer pricing (TP) methods used, the reporting entity should specify the main TP method that is applied to each reported transaction.

The concept of “main TP method applied” is assessed with

regard to the amount of transactions carried out by the reporting entity, by type of transaction and by jurisdiction of residence of the related entity with which the transaction was concluded.

Example:

80% of the amount of intra-group goods purchases of the reporting entity in Egypt are made on the basis of the comparable uncontrolled price (CUP) method and 20% on the basis of the resale price method.

Only the first method should be mentioned on the line “Goods – Buyer – Egypt” by the reporting entity.



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