Choosing a TP Adviser Who Can Defend the Position

A transfer pricing (TP) report can contain an attractive range, a recognised database and a confident conclusion while leaving the central commercial questions unanswered. The business is buying professional judgement about its transactions — and a record of that judgement that can withstand examination. Database access and report production are useful inputs, but the quality of the reasoning determines how useful the final work will be.

THE CENTRAL COMMERCIAL QUESTIONS ? 1

Who actually makes the decisions?

2

What risks does the business control?

3

Why is the selected company the right party to test?

4

What evidence establishes that the comparables perform similar activities?

The business interview comes before the margin ? “Who will you speak to, and how will you establish what our business actually does?”

What a credible answer includes. Interviews with the people responsible for commercial decisions, operations and finance, supported by contracts and transaction records. A questionnaire alone may not reveal who approves discounts, decides credit limits, controls inventory exposure or manages key customer relationships.

Three layers to distinguish. The trade licence description, the contractual allocation of responsibilities and actual conduct. These may align — but that alignment needs to be established. The UAE framework requires the analysis to reflect the transaction's characteristics, including functions, assets and risks. [1]

Trade licence description ? → ? Contractual allocation ? → ? Actual conduct ? Ask for the basis of the characterisation

“Why are you describing us as a limited-risk distributor, contract manufacturer, service provider or entrepreneur?”

An answer based only on a group policy or a familiar industry label is incomplete. Request the factual bridge between the description and the evidence. The label should help explain the transaction — it should not predetermine the margin before the business has been examined. A report that calls a company routine while describing substantial independent commercial authority needs a clear reconciliation.

For a distributor, show who… ? Determines prices ? Bears obsolete stock ? Develops the market ? Manages customer defaults ? Has the resources to absorb those risks

“Why have you selected this entity or segment as the tested party, and what would change your conclusion?”

For a one-sided method, ask whether the selected party has the less complex profile and reliable comparable information. The UAE entity is not selected simply because the report is being prepared in the UAE — the other party's activities also matter to the decision.

“Which methods did you consider, and what evidence led you to reject the alternatives?”

A useful explanation addresses actual internal comparables, data quality and transaction characteristics. Generic statements such as “the Comparable Uncontrolled Price method (CUP) is unavailable” need to identify what was investigated. Transactional Net Margin Method (TNMM) selection should explain the tested activity, the cost or revenue base and why a net profit comparison reliably addresses the transaction. [2]

Look inside the qualitative comparable review ? “Can you show us how the accepted and rejected companies were assessed?”

Ask for the original search population, search date, screening criteria and a company-by-company decision trail, supported by website pages, annual reports and other reliable evidence. Industry codes identify possible candidates; they do not settle comparability. [2]

A WEAK ANSWER ? “Functionally different.”

No stated difference, no source — nothing another reviewer can evaluate. Rejections of this kind weaken the whole set.

AN EVIDENCE-BASED ANSWER

“The company manufactures branded products and undertakes substantial product development, while the tested party only distributes third-party goods.”

A stated difference a reviewer can evaluate.

Handle the hard cases consistently: a missing website does not establish a company's functions, and an unusually high or low margin is a reason to investigate — not, by itself, evidence that the company is unsuitable. The FTA guide emphasises documented selection criteria and reasons for exclusions. [2]

Ask the adviser to think from the other side ? “What would a tax authority challenge first, and what evidence would answer that challenge?”

Advisers who have defended positions may recognise where functional descriptions fail under questioning, which comparable exclusions attract attention and how accounting inconsistencies weaken otherwise sound arguments.

Ask for anonymised examples of issues defended, the jurisdiction, the stage of the proceedings and the proposed team's personal involvement. Distinguish a reasoned acceptance of the TP position from a negotiated settlement or a case that closed on a different issue — and ask what that experience changed in the team's approach to documentation.

An indicator, not a guarantee. Successful defence is a useful indicator of relevant experience, not a guarantee of the next outcome. An adviser with strong research, judgement and review controls may also produce excellent work. Evaluate the people who will perform and review your assignment, as well as the firm's credentials.

Ask whether the policy works for the counterparty ? “Would the other country's authority understand and accept the same commercial explanation?”

Ask whether the proposed adjustment affects the counterparty's deduction, taxable income, withholding tax, invoicing or accounting. A UAE conclusion does not establish compliance abroad. The factual account should stay consistent even where local documentation and comparable requirements differ. A payment described as a service fee by the recipient should have a coherent service and benefit explanation for the payer — a cost-plus conclusion cannot resolve a separate dispute over whether any service was received.

Ask what happens after the report

“How will the policy be implemented, monitored and updated — and what will we receive that allows us to reproduce the conclusion?”

Expect a practical answer covering agreements, invoices, cost allocations, segmented accounts, periodic monitoring and responsibility for any true-up — plus who prepares the annual comparable financial update, when a fresh search is required and what support is included if the FTA requests information.

Deliverables you can reuse. The agreed deliverables should include the calculations, financial reconciliation, comparable decision trail and implementation recommendations, subject to legitimate database licensing restrictions. Understand what evidence remains accessible if the adviser changes.

Common mistakes businesses can identify

Weak work often reveals itself through disconnected sections: a standard functional analysis, an unexplained tested party, an entity-wide margin covering unrelated transactions, comparable exclusions without evidence, inconsistent profit indicators, stale data, salary conclusions based only on company profits, and agreements describing activities the business does not perform.

Avoid asking for a predetermined result. A request to “find a range that includes our margin” undermines objective selection. Ask instead for a defensible analysis of the facts, an explanation of any exposure and practical ways to improve the position.

Ask for: Business understanding; A useful response contains: Interview plan, operational records and a clear characterisation rationale

Ask for: Method judgement; A useful response contains: Transaction-specific alternatives, data limitations and tested party reasoning

Ask for: Comparable quality; A useful response contains: Search history, qualitative evidence and reviewable acceptance/rejection decisions

Ask for: Defence capability; A useful response contains: Relevant examples, team involvement and an assessment of likely challenges

Ask for: Implementation; A useful response contains: Agreements, calculations, monitoring, ownership and counterparty review

The right adviser should make the position easier for management to understand and explain. A defensible range starts with a defensible account of the business.

TAKE THESE QUESTIONS INTO THE APPOINTMENT MEETING ? 1

Who will you speak to, and how will you establish what our business actually does?

2

Why are you describing us as a limited-risk distributor, contract manufacturer, service provider or entrepreneur?

3

Why have you selected this entity or segment as the tested party, and what would change your conclusion?

4

Which methods did you consider, and what evidence led you to reject the alternatives?

5

Can you show us how the accepted and rejected companies were assessed?

6

What would a tax authority challenge first, and what evidence would answer that challenge?

7

Would the other country's authority understand and accept the same commercial explanation?

8

How will the policy be implemented, monitored and updated — and what will we receive that allows us to reproduce the conclusion?

SOURCES & PUBLICATION NOTE ? 1

UAE Ministry of Finance, Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments, consolidated English version dated 13 January 2026 (identified as an unofficial translation). Relevant provision: Article 34. Link

2

Federal Tax Authority, Transfer Pricing Guide, CTGTP1, October 2023 — method selection, comparability analysis and documented selection criteria. Link

Publication note. General information based on UAE sources reviewed as at 12 September 2026. Application depends on the facts, the applicable Tax Period and subsequent developments. OECD guidance provides interpretative context and does not replace applicable UAE law.