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Intercompany transactions

Follow every transaction with your related parties, record its transfer pricing method and justification, and mark what was not at arm's length for the corporate tax return.

For Verasol 2.12·6 min read

Intercompany Transactions is the register of everything your company did with its related parties in a year: sales, purchases, fees, interest, loans. The corporate tax return reads it. A transaction that was not at arm's length is added back to taxable income (Article 34), and the related-party reports show what to disclose and what still needs transfer pricing support.

The register does not post anything. The income and expenses are already in your books through the invoices and bills; the register describes them for corporate tax.

How transactions get into the register#

Most transactions arrive by themselves, once the customer or vendor is in the related parties register and while the International Business module is on:

  • An invoice or credit note you issue to a related customer is added when it is issued.
  • A bill or debit note from a related vendor is added when it is approved.

Each one is registered net of VAT, in its own currency and in AED at the document's rate. A credit note or debit note counts as a negative amount. A draft is never in the register, and a document that is cancelled or deleted leaves it again.

When a document is registered, Verasol gives it the nature Sale of goods (an invoice) or Purchase of goods (a bill) and marks it at arm's length, until you review it. Review each transaction and correct the nature when it was, for example, a sale of services or a management fee.

The list#

Open International › Intercompany Transactions.

Intercompany Transactions: the transactions with the Saudi sister company
  • 1 New Transaction adds a transaction by hand (see below). 2 Export downloads every transaction the filters match, on all pages, as a CSV file that opens in Excel.
  • The cards add up every transaction the filters match: the number of Transactions (with those not at arm's length, and the loans and capital movements, which are neither income nor expense), the Income (AED) and the Expense (AED) with their number, and 3 Missing documentation: the transactions that need transfer pricing support and have no pricing justification yet. Show these lists only those.
  • Filter by Search (the party, the document number, the description or the notes), Related Party, Nature, Income or expense, Arm's length and Period (This Month, Last Month, This Quarter, This Year, or dates you choose), or switch on 4 Missing documentation only. Reset clears the filters. The View → link of the dashboard's warning opens the list with Missing documentation only on, for the financial year the dashboard shows.
  • Each line shows the Date, the Related Party, the Document (the invoice or bill number, or Manual Entry), the Nature and, under it, whether it is income or an expense of your company, the Currency, the Amount, the Amount (AED), the TP Method and whether it was at Arm's Length.
  • 5 The eye shows the transaction: its details, its arm's-length data and whether it has the transfer pricing support it needs, with Open the document for a registered invoice or bill. 6 The pencil opens it for review. The bin deletes a transaction you added by hand.

Review a transaction#

Click the pencil on the line, or Edit in the panel the eye opens.

Reviewing a registered invoice: method, justification and arm's-length value
  1. Check 1 the Nature of Transaction. An invoice cannot take a nature of expense (a purchase or interest paid), and a bill cannot take a nature of income (a sale, interest received or a dividend): Verasol refuses it with a message.
  2. Choose 3 the Transfer Pricing Method: comparable uncontrolled price (CUP), resale price (RPM), cost plus (CPM), transactional net margin (TNMM), profit split (PSM) or another method.
  3. Explain the price in 4 Pricing Justification, for example the agreement or the benchmarking study it rests on.
  4. If the price was at arm's length, leave This transaction is at arm's length price ticked. If it was not, untick it and enter 5 the Arm's-length value (AED): the price independent parties would have agreed.
  5. Click Update Transaction.

2 For a registered invoice or bill, the Document ID, the date, the currency, the rate and the amount come from the document. They are greyed out, with a note that they come from the document: to change them, correct the document. The Related Party and the Source Type of a saved transaction are greyed out too.

Once the corporate tax return of a year is filed, the date, value, nature and arm's-length data of its transactions are locked; Verasol says which return to reopen first. The method, the justification and the notes can still be completed.

Which transactions need transfer pricing support#

Verasol marks a transaction as needing support when it is worth AED 50,000 or more on its own, or when its nature is always documented: management fee, royalty, IP licensing, interest received or interest paid.

A transaction that needs support has it when it carries a pricing justification, or when its related party has a final transfer pricing document for that year. The dashboard warns about the transactions without a justification, and the Transfer pricing report lists those without either. See Transfer pricing documentation.

Add a transaction by hand#

Use New Transaction for a transaction with a related party that is not an invoice or bill in Verasol, such as a loan given or received, a loan repayment, interest, a dividend or a guarantee fee.

  1. Click New Transaction.
  2. Choose the Related Party and the Nature of Transaction.
  3. Enter the Transaction Date, the Currency and the Amount. For a foreign currency, leave Exchange Rate to AED empty to use the CBUAE rate of the date, or enter the rate. When no rate is known for that date, Verasol asks you to enter it.
  4. Add a Description, the Transfer Pricing Method, the Pricing Justification and Notes, and the arm's-length data as above.
  5. Leave the Source Type on Manual Entry, and click Create Transaction.

An issued invoice or approved bill of a related party is already in the register; registering it a second time is refused.

A transaction added by hand can be deleted with the bin. A registered invoice or bill cannot: it leaves the register when the document is cancelled or deleted.