Public Clarification on Downward TP Adjustment

Public Clarification on Downward TP Adjustment

by | Jul 20, 2026

The Federal Tax Authority (FTA) has issued a Corporate Tax Public Clarification (CTP 011) to clarify the disclosure requirements and key considerations associated with downward adjustments made by a taxable person in the Corporate Tax (CT) Return. The key aspects of the clarification are summarized below:

Key Aspects of the Public Clarification

Aspects Clarification
Requirements under CT
  • All transactions and arrangements between related parties must comply with the arm’s length standard
  • If transactions with the related parties are not recorded at arm’s length in financial statements, appropriate Transfer Pricing (TP) adjustments (either upward or downward) must be made by the taxable person in the CT return
  • TP adjustments in the CT return can be upward (increase taxable income) or downward (decrease taxable income)
  • As per CT return form, disclosure is required to be made for all transactions and arrangements with Related Parties, only if they exceed the applicable threshold
Disclosure Obligation
  • Business must self-assess the requirement to make appropriate TP adjustments in the CT Return
  • No prior approval is required from the FTA to make TP adjustment in the CT return, however, the same may be subject to a Tax Audit
  • All transactions with related parties involving downward adjustments must be disclosed in CT return, irrespective of nature of arrangements/ transactions or value
Documentation Requirements for Downward Adjustments
  • Rationale for making downward adjustment
  • Arm’s length analysis including benchmarking study
  • Reconciliation between financial statements and CT return values
  • Corresponding symmetrical adjustments by related parties to the transactions and arrangements
Non-Applicability Clarification applicable only to adjustment required under Article 34(1) of the CT Law and does not extend to corresponding adjustments under Articles 34(10) and 34(11)

Key Actions Steps

  • Review their related-party transactions and arrangements closely and ensure compliance with the aforesaid requirements in CT return filings
  • TP documentation, CT return disclosure and Financial Statements are aligned before filing

Please click here to download the Public Clarification

Reach Us