Transfer Pricing in the UAE

01 · SCOPE

The arm’s-length principle applies before documentation thresholds

Article 34 of the Corporate Tax Law applies to transactions or arrangements between Related Parties and Connected Persons. It requires the result to be consistent with what independent parties would have agreed under similar circumstances. The scope is not limited to invoices, international payments or multinational groups. A domestic service, owner salary, interest-free balance, asset transfer or undocumented arrangement can be controlled.

The law identifies five recognised methods and permits another method when the Taxable Person can demonstrate that none can reasonably be applied and the alternative satisfies the arm’s-length standard. Method choice follows facts and reliable information, not convenience.

Four obligations that are often confused

Free Zone Persons and Qualifying Free Zone Persons remain within transfer pricing. Compliance supports the QFZP conditions but does not prove that income is Qualifying Income. Small Business Relief and other elections can affect documentation consequences without turning non-arm’s-length pricing into acceptable conduct.

02 · RELATED PARTIES AND CONNECTED PERSONS

Build the relationship register before the transaction inventory

Article 35 includes natural persons related up to the fourth degree of kinship or affiliation and relationships between natural and juridical persons, juridical persons, partnerships, trusts/foundations and Permanent Establishments through ownership, control or connection. Control can arise through voting rights, entitlement to profits or liquidation proceeds, board composition, significant influence or other powers defined by law.

Map direct and indirect interests, common control and the combined position of a natural person with Related Parties. Do not stop at the shareholder register. Agreements, vetoes, appointment rights and economic entitlements can matter. Branch and PE dealings, Exempt Persons, Free Zone Persons and elected Resident Persons require the specific law and Ministerial Decision analysis.

Connected Persons

Article 36 addresses payments or benefits to an owner, director or officer and their Related Parties, subject to the detailed definitions and statutory exceptions. Deduction is generally limited to Market Value and requires the amount to be incurred wholly and exclusively for business. A board approval, employment contract or disclosed schedule does not establish market value by itself.

03 · CONTROLLED TRANSACTION MAP

Inventory the complete economic relationship

Use gross income, expenses, assets, liabilities and off-ledger arrangements. Reconcile the inventory to financial statements, trial balance, contracts and the Corporate Tax return.

04 · FUNCTIONAL ANALYSIS AND DELINEATION

Identify who does, owns and controls what

Functional analysis maps economically significant functions, assets used and risks assumed. For a risk to justify a return, examine who makes control decisions and whether that entity has financial capacity. A contract allocating inventory, credit or product risk to one company is weak if another company controls every relevant decision.

Start with the group value chain: sourcing, development, production, sales, delivery, support, financing and strategy. Then delineate the transaction actually conducted. Interview operating personnel, not only finance. Connect authority matrices, systems access, budgets, timesheets, meeting evidence and cash flows.

Tested party and aggregation

One-sided methods often select the less complex party for which reliable data exist. Explain why the tested party, profit indicator, period and segmentation fit. Transactions may be aggregated where closely linked, but aggregation must not hide different functions or loss-making products.

Intangibles and DEMPE

Legal title is the starting point, not the end. Map development, enhancement, maintenance, protection and exploitation; funding; control over risks; and expected benefits. Do not relocate a residual profit merely by signing a licence or registering IP.

05 · ARM’S-LENGTH METHODS

Select the most appropriate method—not the easiest spreadsheet

Comparability and ranges

Comparable circumstances include contractual terms, characteristics, functions/assets/risks, economic circumstances and business strategies. Search for reliable internal comparables before relying on databases. External searches require transparent filters, screening and financial adjustments. An arm’s-length range can arise, but the selected point must reflect the facts. Loss-makers are not automatically rejected; understand whether losses are comparable, persistent or driven by different risk and lifecycle conditions.

06 · SERVICES, FINANCING AND INTANGIBLES

Three recurring flows need different evidence

07 · DOCUMENTATION

Policy explains the rule; evidence proves the year

A defensible file contains the group and entity background, relationship register, transaction inventory, agreements, functional analysis, method selection, comparable search, financial testing, adjustments and conclusions. Reconcile tested results to audited or approved financial data and the Corporate Tax return. Maintain invoices, service evidence, loan records, approvals and source data supporting actual conduct.

Current Local File and Master File thresholds

Ministerial Decision No. 97 of 2023 requires both files where either the Taxable Person’s Revenue in the relevant Tax Period is at least AED 200,000,000, or the Taxable Person is a Constituent Company of an MNE Group with total consolidated group Revenue of at least AED 3,150,000,000 in that period.

The Local File does not automatically include every controlled transaction. The Decision specifies categories of counterparties included and exclusions, including conditions for transactions with certain UAE Resident Persons. Apply those rules after identifying the counterparty’s residence, exemption, election and tax position.

Article 55 allows the FTA to request the files, which must be supplied within 30 days or another period specified by the Authority. The FTA guide permits English or Arabic documentation; translation may be requested. Maintain files contemporaneously and refresh them for changes in facts and comparability. CbCR remains separate.

08 · CORPORATE TAX RETURN DISCLOSURE

Three current thresholds, three different tests

Categories include goods, services, intellectual property, interest, assets, liabilities and other reportable amounts in the return guide. Use gross income/expense and Market Value fields as instructed, identify residence and TRN/TIN where available, state the method and calculate any adjustment.

Adjustments and corresponding relief

An upward adjustment may be required where the controlled result is not arm’s length. A downward adjustment reducing UAE Taxable Income is not simply booked: the current return guide and law require the applicable FTA approval route. Corresponding adjustments and foreign competent-authority adjustments have their own conditions. Do not net disputes through intercompany accounts without a legal process.

Thresholds and form fields must be rechecked for each filing because the live EmaraTax return and current FTA guidance control. The figures above were verified against the official guide at 3 August 2026.

09 · FREE ZONE AND QFZP

Transfer pricing compliance is necessary, not sufficient, for 0%

A Qualifying Free Zone Person must satisfy the arm’s-length principle and maintain transfer-pricing documentation as required. Transactions with mainland entities, other Free Zone Persons, foreign related parties and PEs need delineation and pricing. The QFZP framework separately tests adequate substance, Qualifying Income, excluded activities, audited financial statements and other conditions. A benchmarked price cannot convert an excluded activity into a qualifying one.

10 · SIX ILLUSTRATIVE EXAMPLES

Numbers expose the analysis; they do not create safe harbours

11 · TRANSACTION HEATMAP AND DECISION TREE

Prioritise complexity and evidence—not an invented probability

12 · WORKSHEET, MISTAKES AND CHECKLIST

Transfer-pricing transaction-mapping worksheet

Print this page or save it as PDF. Create one row for each counterparty and transaction category.

Common mistakes

Annual TP readiness checklist

1. 01

   Legal group chart, ownership percentages, control rights, partnerships and Permanent Establishments

2. 02

   Related Party and Connected Person register linked to Articles 35 and 36 definitions

3. 03

   Transaction inventory by counterparty, category, currency, gross income/expense and balance

4. 04

   Intercompany agreements, amendments, invoices, credit notes and payment evidence

5. 05

   Functional interviews covering people, decisions, assets, risks and financial capacity

6. 06

   Value-chain map and DEMPE analysis for material intangibles

7. 07

   Segmented financial data reconciled to the ledger, statements and Corporate Tax return

8. 08

   Method-selection record, tested party, profit-level indicator and aggregation rationale

9. 09

   Internal comparable search and external benchmarking data where necessary

10. 10

    Comparability and working-capital adjustments with calculation support

11. 11

    Service benefit evidence, cost pools, exclusions, allocation keys and markup support

12. 12

    Loan, guarantee and cash-pool terms plus credit and market evidence

13. 13

    Connected Person roles, benefits, approvals, market value and business-purpose evidence

14. 14

    Disclosure threshold calculation by total and transaction category

15. 15

    Local File/Master File threshold test and inclusion/exclusion analysis

16. 16

    CbCR scope assessment kept separate from TP disclosure and Local/Master File

17. 17

    Free Zone/QFZP condition and Qualifying Income review where relevant

18. 18

    Open adjustments, corresponding-adjustment requests and competent-authority issues

19. 19

    Document owner, completion date, annual refresh trigger and FTA-request response plan

13 · FREQUENTLY ASKED QUESTIONS

Transfer Pricing UAE FAQ

14 · OFFICIAL SOURCES

Official sources used

Last reviewed 3 August 2026. Reviewed by MP Elites. Numerical thresholds were checked against the Corporate Tax Law, Ministerial Decision No. 97 and the current FTA Tax Return Guide. OECD Guidelines are an international reference recognised in the UAE framework, not a substitute for UAE law.

PRACTICAL APPLICATION

How to turn a policy into a defensible annual process

Delineate conduct, not labels

Delineation is more precise than repeating an agreement label. It asks what was provided, by whom, for whose benefit, on which commercial terms and with which realistic alternatives. Review what personnel actually did, which decisions they made, what information they used and who could accept, mitigate or terminate the relevant exposure. Where written terms and conduct diverge, record the inconsistency and determine whether contracts, pricing or operations need correction.

Risk control is not routine administration. The entity claiming a risk-related return should make the substantive decisions to take on and respond to that risk, and should have financial capacity to bear the consequences. Budget approval alone may be insufficient where another party designs the response and controls execution. The file should identify decision-makers and connect minutes, delegated authorities and operational records to the transaction tested.

Make benchmarking reproducible

Benchmarking is a reproducible decision process, not a database screenshot. Preserve the tested-party choice, search geography, industry codes, independence criteria, financial filters, manual accept-or-reject reasons, source dates and calculations. Explain why the profit-level indicator follows the tested party’s functions and reliable accounts. Working-capital or accounting adjustments require a reason, consistent inputs and a material improvement in comparability.

Multi-year information may help identify cycles, start-up conditions or persistent losses, but the tested Tax Period still needs a supported conclusion. A statistical range does not make every point equally reliable, and a median is not a statutory safe harbour. If results fall outside a defensible range, establish whether operating events, classification errors, exceptional items or controlled pricing caused the result before recording an adjustment.

Refresh evidence and Free Zone analysis

A policy written once does not prove annual compliance. At each close, confirm ownership and control, new or discontinued flows, agreement changes, actual service delivery, loan movements, segmentation and the tested result. Assign owners for legal agreements, operational evidence, accounting extraction, benchmarking and return disclosures. Keep an exception log so unresolved matters are visible before filing rather than discovered during an FTA request.

For a Free Zone entity, map each income stream to its counterparty, activity, assets, people and place of performance before selecting a method. Separate the arm’s-length amount from the later classification of income under the QFZP rules. Pricing, substance and income classification must tell the same factual story. A transfer-pricing adjustment can change taxable or qualifying results, but cannot cure a failed licence, substance, audited-financial-statement or excluded-activity condition.