Qatar: FAQs address transfer pricing documentation

Clarifications for the preparation of the Master file and Local file

Clarifications for the preparation of the Master file and Local file

The tax authority issued a set of “frequently asked questions” (FAQs) intended to clarify transfer pricing documentation rules—including clarifications for the preparation of the Master file and Local file—as taxpayers prepare for their first transfer pricing compliance for the financial year 2020.

  • The FAQs specify that the main purposes of the transfer pricing documentation are to demonstrate that taxpayers have given proper consideration to the transfer pricing requirements and to provide the tax authority with necessary information and tools to evaluate the overall tax risk.
  • The FAQs stress the responsibility and importance of contemporaneous documentation, as required by regulations. 

KPMG observation

Well-prepared contemporaneous transfer pricing documentation can provide the tax authority with some assurance on the integrity of the taxpayer’s positions and underlying analysis.

Highlights of FAQs

  • The FAQs provide a fresh interpretation of the definition of associated entities (related entities). The interpretation will have to be evaluated by taxpayers on a case-by-case basis, in light of the related entities definition provided under Article 52 of the regulations.
  • The FAQs introduce the “main transfer pricing method” principle. In instances when more than one method is used for a particular category of transactions, the transfer pricing method that is applicable to the majority of transactions under a category, will have to be reported and will be considered to be the main transfer pricing method.
  • The FAQs provide for a materiality threshold—an aggregate of QAR 200,000 per category or type of transaction.
  • Entities that do not conduct any transactions with related entities may submit a “NIL” declaration, as clarified by the FAQs.
  • While it is clear that the deadline for filing the transfer pricing declaration is the same as the deadline for filing tax returns, the FAQs re-emphasize that 30 June of the following financial year is the due date for filing the Master file and Local file—i.e., for a 31 December financial year-end, the deadline for filing Master file and Local file is 30 June. A question on the filing deadline for entities having a different year-end continues to be unanswered. 

KPMG observation

While the FAQs provide additional insights into the applicability and contents of the transfer pricing reporting requirements and documentation, there is some ambiguity regarding certain aspects including alignment of the definition of related entities (in the regulations) and associated entities (in the FAQs) with regulations; a reference to multinational entity (MNE) groups; and alignment with pre-populated data on Dhareeba system.

Tax professionals encourage reading the FAQs together with the regulations and Resolution No. 4 of 2020, while keeping in perspective the intent of the regulations and potential tax risk, in order to have comprehensive understanding of the implications of the transfer pricing regulation on each taxpayer. The key is to maintain robust and contemporaneous documentation to be able to substantiate compliance with the arm’s length requirements and to reduce the possibility of detailed transfer pricing audits.
 

Read a May 2021 report [PDF 152 KB] prepared by the KPMG member firm in Qatar

 

 

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