Transfer pricing is the price applied to transactions between entities under common control, which UAE law requires to be set at arm's length — the price that would have been agreed between independent parties. Where that value turns out to be lower than the amount booked, taxable income must be corrected downwards, and until this clarification that correction required the written go-ahead of the tax authority. The most common configuration affected is a UAE company invoicing a company in another jurisdiction owned by the same person.
What happened
In August 2026 the Federal Tax Authority (FTA), the UAE's federal tax administration, issued a public clarification — a document by which the authority sets out, for all taxpayers, its interpretation of a provision — on the disclosure and documentation obligations attaching to transfer pricing adjustments in the corporate tax return. The point that changes matters is the downward adjustment: the correction that reduces taxable income because the price applied to an intra-group transaction was higher than the arm's length value. Before this clarification, a downward adjustment required prior approval from the FTA. It no longer does: the taxpayer self-assesses it and discloses it in the return. The stated reason is procedural simplification, consistent with the self-assessment architecture on which UAE corporate tax has been built from the outset.
What changes in practice
The regime moves from authorisation to documented self-assessment, and the difference is felt at two opposite moments. Before: there is no longer a review to wait for, so the adjustment goes into the return due on 30 September 2026 without depending on the authority's timetable. After: there is no longer anyone confirming in advance that the value is correct. Prior approval also worked as a shield, and that shield has gone. Whether the adjustment stands is now argued at audit, on the basis of the documentation the taxpayer assembled when the adjustment was made — not the documentation reconstructed two years later.
Who it applies to
Every UAE company with related-party transactions: groups with multiple entities, holding companies and subsidiaries, and above all the widespread configuration in which a UAE company and a company in another jurisdiction, both owned by the same person, invoice each other for services, royalties or financing. In that relationship the arm's length value is not a formality: it is the pivot the whole structure rests on, and it is the first point examined both by the FTA and by the tax administration of the counterparty's jurisdiction.
The exposure
The risk is reading the news purely as a simplification and stopping there. A downward adjustment without supporting documentation is challenged on audit, with tax recovered and a penalty applied, and the taxpayer is left to prove after the event a value that nobody ever confirmed. There is a second risk on the other side of the border: the same transaction is examined by the foreign tax administration as well, and an adjustment that reduces the UAE taxable base shifts taxable profit in a way that has to hold up, on the same document, before two different authorities.
What to do now
List the transactions that passed during the 2025 financial year between entities under common ownership — service invoices, royalties, shareholder loans, cost recharges — and for each one write down the basis on which the price was set. If for any of them the answer is that the price was decided without reference to comparable transactions between independent parties, that is the item to fix before 30 September 2026, the corporate tax filing deadline for financial years ended 31 December 2025. The documentation should be built now and dated now: building it during an audit costs far more and persuades far less.
Sources
- https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.guides.references.aspx
- https://tax.gov.ae/en/taxes/corporate.tax.aspx
Published 31 August 2026 on the basis of public sources and official United Arab Emirates instruments. This is not legal or tax advice. Verify your position with a qualified professional before acting.