DEMPE Functions Analysis for Intangible Assets
Official Principle: "Legal ownership of IP alone is insufficient; economic substance in Development and Management determines profit allocation." — Владения патентом недостаточно: прибыль распределяется там, где выполняются функции разработки и управления.
📊 Regulatory Parameters & Compliance Table
| Documentation Level | Threshold / Applicability | Required Filing | Regulatory Scrutiny |
|---|---|---|---|
| Arm’s Length Principle | All transactions with Related Parties | Contractual benchmarking | Mandatory under Art. 34 |
| Local File | Revenue > AED 200M or MNE group | Detailed entity analysis | Submission within 30 days of request |
| Master File | MNE Group Turnover > AED 3.15B | Global group blueprint | OECD BEPS Action 13 compliant |
| Disclosure Form | Annual Tax Return submission | Schedule of related transactions | Verified by Tax Authority |
✓ Mandatory Compliance Action Steps:
- Identify and catalog all Related Parties and Connected Persons under Article 35 of Decree-Law No. 47
- Benchmark cross-border intercompany fees against independent market transactions
- Draft formal intercompany service agreements prior to transaction execution
- Maintain Transfer Pricing documentation file ready for 30-day FTA audit notice
- Complete Transfer Pricing disclosure schedule within the corporate tax return
1. Core Statutory Provision & Key Legal Rule
"Legal ownership of IP alone is insufficient; economic substance in Development and Management determines profit allocation."
"Владения патентом недостаточно: прибыль распределяется там, где выполняются функции разработки и управления."
2. Practical Application for UAE Businesses
Under the UAE federal tax framework governed by OECD Transfer Pricing Guidelines Chapter VI, all taxable persons registered across Mainland jurisdictions and Free Zones (including Meydan, DMCC, DIFC, IFZA, DAFZA, and JAFZA) must align their accounting policies with this requirement.
- IFRS Accounting Standard: Financial statements must be prepared in accordance with International Financial Reporting Standards (IFRS or IFRS for SMEs).
- Record Retention: Primary accounting records, bank reconciliations, contracts, and tax filings must be archived for a minimum statutory period of 7 years.
- Audit Readiness: The Federal Tax Authority reserves statutory rights to request ledgers and supporting invoices during an official tax audit with a 5-day response window.
3. FTA Administrative Penalties (Cabinet Decision No. 75/2023)
Failure to register, inaccurate return filing, or violation of OECD Transfer Pricing Guidelines Chapter VI exposes the taxable entity to administrative fines starting from AED 10,000 up to AED 20,000 per incident, plus 1% monthly late-payment penalties.
Solution: Timely registration through the FTA EmaraTax portal and voluntary disclosure (Form 211) before an official audit notice is served.
Have Questions Regarding DEMPE Functions Analysis for Intangible Assets?
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