Will the payment of a royalty to a foreign company in the worldwide group be deductible?
Ordinarily, a royalty payment to a foreign group company can be eligible for deduction when it constitutes a essential business expenditure. Furthermore, under UAE Corporate Tax regulations, a foreign group company is typically categorized as a Related Party to the UAE business. This classification necessitates that the royalty payment be conducted at arm’s length, meaning it should reflect a fair market rate. If the payment deviates from this arm’s length principle, any amount exceeding the market rate would not qualify for deduction
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