TRW & Co · Tax & Regulatory
Transfer Pricing in the UAE
Transfer pricing in the UAE now decides how much profit a UAE company reports whenever it trades with affiliates, owners or directors. The Corporate Tax Law imposes an arm's length standard, a disclosure form, master and local files for larger groups and, since December 2025, an APA programme. This guide explains the thresholds, the documents and the audit risks.
Key pointConnected-person rules catch owner-managed businesses as well as multinationals: salaries, rent and fees paid to shareholders, directors and their relatives are deductible only at market value, and payments above AED 500,000 are reported to the FTA with the return.
At a glance
Arm's length standard
Article 34 of the Corporate Tax Law requires related-party transactions to be priced as between independent parties, using one of five OECD-recognised methods.
Disclosure form trigger
Related-party transactions above AED 40 million in total are disclosed with the corporate tax return, with each category above AED 4 million reported separately.
Master and local files
Required where UAE revenue reaches AED 200 million or group revenue reaches AED 3.15 billion, and produced within 30 days of an FTA request.
APA programme opened
The FTA's APA Guide was published on 31 December 2025, with unilateral APAs for domestic transactions accepted first and cross-border agreements to follow.
Pillar Two overlay
Groups with global revenue of EUR 750 million or more face the UAE Domestic Minimum Top-up Tax for financial years starting on or after 1 January 2025.
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What transfer pricing in the UAE covers
Transfer pricing in the UAE is the set of corporate tax rules that require transactions between related parties, and payments to connected persons, to be priced as if the parties were independent. It decides how much taxable profit stays in a UAE entity when it sells goods to an affiliate, pays a management fee, licenses a brand, borrows from a parent or moves an asset inside the group.
Until corporate tax arrived, intra-group pricing in the UAE was mainly a question for the other country. That changed for tax periods starting on or after 1 June 2023. The Federal Tax Authority (FTA) can now adjust UAE profits upwards, deny deductions and impose penalties, and every UAE taxpayer with related-party dealings has to think about it, including free zone companies and family groups that never had a tax function.
The rules touch more than multinationals. A founder who is also a director and receives consultancy fees, a family company that leases property from its shareholders at a nominal rent, or a free zone entity that buys from a mainland sister company can all fall within the regime.
The legal framework for transfer pricing in the UAE
The core rules sit in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Corporate Tax Law), administered by the FTA under policy set by the Ministry of Finance. The provisions that matter most for pricing are:
- Article 34 – the arm’s length principle, the recognised pricing methods and the FTA’s power to make adjustments.
- Article 35 – who counts as a related party, including individuals linked by kinship, and entities linked by ownership or control at a 50% threshold.
- Article 36 – payments and benefits to connected persons (owners, directors, officers and their related parties) are deductible only to the extent they reflect market value and are incurred wholly and exclusively for the business.
- Article 55 – the transfer pricing disclosure form and the master file and local file.
- Article 59 – the legal basis for advance pricing agreements (APAs).
Detail comes from secondary legislation and guidance. Ministerial Decision No. 97 of 2023 sets the documentation thresholds, and the Ministry of Finance announced it publicly in May 2023 (see the official WAM announcement). Cabinet Resolution No. 44 of 2020 governs country-by-country reporting for large groups. The FTA’s Transfer Pricing Guide (published in October 2023) and its APA Guide (published at the end of December 2025) are not binding, but they show how the FTA reads the law and are aligned with the OECD Transfer Pricing Guidelines. The FTA’s corporate tax pages and legislation library hold the current versions.
Transfer pricing in the UAE does not operate alone. It interacts with the general anti-abuse rule, the interest limitation rules, the qualifying free zone regime, the small business relief regime and, for the largest groups, the Domestic Minimum Top-up Tax. Our overview of corporate tax in the UAE explains those wider rules.
| Obligation | Who it applies to | Timing | Practical note |
|---|---|---|---|
| Transfer pricing disclosure form | Taxpayers whose related-party transactions in the period exceed AED 40 million in total; each category above AED 4 million is then reported | Filed with the corporate tax return | Values are counted at market value where the book value differs |
| Connected person schedule | Payments or benefits to a connected person (with its related parties) above AED 500,000 | Filed with the return | Director and shareholder remuneration is the usual trigger |
| Master file and local file | UAE revenue of AED 200 million or more, or membership of an MNE group with consolidated revenue of AED 3.15 billion or more | Prepared contemporaneously; produced within 30 days of an FTA request | Not filed routinely, but must exist when the FTA asks |
| Country-by-country report | MNE groups with consolidated revenue of AED 3.15 billion or more and a UAE ultimate parent or surrogate | Within 12 months after the end of the reporting fiscal year | Separate notification obligations also apply |
| Domestic Minimum Top-up Tax | Groups with global revenue of at least EUR 750 million in two of the four preceding years | Financial years starting on or after 1 January 2025 | Tops up the UAE effective rate to 15%; pricing drives the jurisdictional result |
Related parties, connected persons and the transactions caught
The first practical question is who sits on the other side of the transaction. Related parties include companies under common ownership or control, a permanent establishment and its head office, partners in an unincorporated partnership, and individuals related by blood or marriage up to the fourth degree, together with the entities they control. Control can arise through shareholding, voting rights, board composition or the ability to direct the business.
Connected persons are a narrower, domestic anti-leakage concept. Salaries, fees, rents and interest paid to a shareholder, director or officer must be at market value and must serve the business. A family company paying a non-working relative a director’s fee, or renting a villa used privately, is the type of arrangement the FTA expects taxpayers to correct before filing.
Typical transactions that need pricing support
In practice the high-value items are: sales of goods to or from group distributors; management, shared-service and head-office charges; royalties for trade marks, technology and know-how; intra-group loans, guarantees and cash pooling; secondment of staff; and transfers of assets, shares or intellectual property on a restructuring. Business restructurings that move functions or risks out of a UAE entity deserve particular care because the FTA can examine whether an independent party would have expected compensation.
Transactions between two UAE taxable persons still need to be arm’s length. The FTA does not treat domestic pricing as tax neutral where, for example, one party is a qualifying free zone person on 0% for qualifying income, has losses, or is exempt. Our guide to free zone company formation explains why qualifying status can be lost if pricing with mainland affiliates is not defensible.
Choosing a method and benchmarking for transfer pricing in the UAE
Article 34 recognises the five OECD methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and transactional profit split. There is no rigid hierarchy. The FTA expects taxpayers to select the most appropriate method for the facts, explain why, and support the result with a benchmarking study or other evidence.
Benchmarking is the hardest part of transfer pricing in the UAE. Regional comparable data is thin, so most studies use pan-regional or global databases with adjustments. The FTA’s guidance accepts the use of an arm’s length range and generally favours the interquartile range. Where a result falls outside the range, the FTA can adjust to a point within it, commonly the median.
Distributors and resellers
Routine UAE distributors are usually tested on operating margin under the transactional net margin method. The common trap is a distributor that bears marketing, inventory and credit risk on paper but earns a thin, fixed return.
Intra-group services
Low value-adding support services may use a simplified cost-plus approach aligned with the OECD guidelines. Charges still need evidence of real benefit, a cost pool and an allocation key that a third party would accept.
Financing and guarantees
Loans need an interest rate a lender would charge a borrower of that credit standing, plus documented capacity to repay. Interest-free shareholder loans and unpaid guarantees attract questions on both sides of the border.
Intellectual property
Royalties should follow the functions of development, enhancement, maintenance, protection and exploitation. Legal ownership alone does not earn the return; people and decision-making must sit where the profit is booked.
Adjustments work asymmetrically. A taxpayer can make an upward adjustment in its own return. A downward adjustment, for example to mirror a foreign authority’s increase on the other side, generally needs the FTA’s agreement. That is why intra-group agreements should carry true-up clauses and year-end review processes rather than relying on corrections after filing.
Documentation, the disclosure form and the 30-day rule
For most UAE taxpayers the first visible obligation is the disclosure form. It lists related-party transactions by category and counterparty once the AED 40 million aggregate threshold is crossed, and it sits alongside a separate schedule for connected-person payments. Errors here are easy to make, because the counts use market value rather than book value and include transactions with exempt and free zone entities.
Larger taxpayers must also keep a master file and local file. They are not filed with the return, but the FTA can request them and the taxpayer then has 30 days to produce them. That window is far too short to prepare documentation from scratch, so the files should be ready when the return is filed. The local file covers the UAE entity’s transactions, functional analysis, method selection and benchmarking; the master file describes the group, its value chain, intangibles and financing.
Small business relief, available to eligible resident persons for tax periods ending on or before 31 December 2029, removes the documentation burden for entities that elect it. Its revenue threshold is low and members of large groups are excluded, so it rarely helps a group subsidiary. Market value rules for connected persons continue to matter even where documentation is light.
Prepare the local file before you file the return, not after the FTA asks for it. The disclosure form and the local file must tell the same story, and the 30-day production deadline leaves no room to reconcile them under audit.
A workable annual cycle
- Map the group. Identify every related party and connected person, including family members and entities they control, and record ownership and control at each period end.
- Inventory the flows. Extract intra-group and connected-person transactions from the ledger by category, counterparty and value, and convert to market value where required.
- Run the functional analysis. Interview finance, operations and commercial leads to confirm who performs functions, owns assets and controls risks in practice.
- Select methods and benchmark. Choose the most appropriate method for each material category and refresh benchmarking at a frequency you can justify.
- Test and true up before year end. Compare actual margins to the target range and book adjustments within the period where the agreements allow it.
- Prepare filings. Complete the disclosure form and connected-person schedule, finalise the local file and obtain the master file from the parent.
- Archive the evidence. Keep agreements, invoices, cost allocations and board approvals for the statutory record-keeping period so the file can be produced on request.
Advance pricing agreements and other routes to certainty
The FTA published its APA Guide on 31 December 2025 and began accepting applications for unilateral APAs covering domestic transactions at that time. Unilateral APAs for cross-border transactions were announced for a later phase, and bilateral and multilateral APAs under the UAE’s tax treaties are planned after that. Check the FTA’s current guidance before planning on a particular type being open.
The published guidance sets a general expectation that covered transactions exceed AED 100 million per tax period, although the FTA can accept smaller cases with good reason. An APA runs for three to five tax periods, an application fee of AED 30,000 applies with AED 15,000 on renewal, and a non-binding pre-filing consultation comes first. Once signed, the taxpayer must file annual declarations confirming that its critical assumptions still hold.
An APA buys certainty for a defined set of transactions; it does not fix a weak value chain. If the facts would not survive an audit, they will not survive the APA review either.
Other certainty tools include private clarifications from the FTA on specific questions, the mutual agreement procedure under a double tax treaty where both countries tax the same profit, and careful use of the corresponding adjustment process. Where the FTA has already raised an assessment, the route lies through reconsideration and objection, discussed in our page on tax disputes and FTA audits.
Risks and common mistakes
Treating free zone and mainland affiliates as one business
Many groups run a free zone trading company and a mainland operating company with shared staff, premises and customers but no intercompany agreements. Under the Corporate Tax Law each is a separate taxable person unless they form a tax group, and a qualifying free zone person cannot join a tax group. The FTA can reprice the flows between them, and a free zone entity whose income is not supported by its own substance risks losing qualifying status for the period and the following four. Written agreements, cost allocations and a clear account of who does what are the minimum defence.
Ignoring connected-person payments
Owner-managed businesses often assume transfer pricing is a multinational issue. In fact, salaries, bonuses, rent and consultancy fees paid to shareholders, directors and their relatives are tested against market value under Article 36. Excess payments are not deductible, and the connected-person schedule makes them visible to the FTA. Benchmark executive pay, document board approval and charge market rent for any property used privately. Our page on family offices discusses how family structures can keep personal and business costs apart.
Using a foreign group policy without a UAE analysis
Group policies written for Europe or India often treat the Gulf hub as a low-risk service provider on a cost-plus return, even where the UAE entity employs the regional leadership and signs the customer contracts. The FTA looks at conduct rather than labels. A policy that strips profit out of a UAE entity that actually controls key risks can be adjusted, and the corresponding foreign deduction may be lost too. Each local file should test the group policy against the UAE facts.
Leaving intra-group loans undocumented
Interest-free or open-ended shareholder loans are common in the region. Under the Corporate Tax Law a loan between related parties should carry arm’s length terms, and interest deductions are separately limited under the general interest limitation rule. Without a loan agreement, a credit analysis and evidence of repayment capacity, the FTA can recharacterise or reprice the financing. Document existing balances now, decide whether to capitalise or price them, and coordinate with any lenders under the group’s financing arrangements.
Restructuring without an exit-value analysis
Moving IP, customer contracts or a business line into or out of the UAE can trigger a transfer pricing question about compensation for what moved. Relief for intra-group transfers and business restructurings exists under the Corporate Tax Law, but it carries conditions and clawback periods. Value the transferred items, document the commercial rationale and check the relief conditions before signing. See our work on corporate restructuring for the wider approvals involved.
Audits, adjustments and penalties
Transfer pricing in the UAE is now a regular feature of FTA audits, with questions often starting as an information request about the disclosure form or a specific charge. The FTA can request the master file and local file, interview staff and ask for underlying agreements. If it concludes that pricing is not arm’s length, it can issue an assessment for the additional tax, plus administrative penalties and late-payment amounts.
The UAE has no penalties specific to transfer pricing. General corporate tax penalties apply for late or incorrect filings, failure to keep records and failure to produce information, and they increase for repeat violations. A revised penalty framework for tax procedures took effect in April 2026; check the current tables on the FTA site before quantifying exposure. Voluntary disclosure remains the best way to correct a known error before the FTA raises it.
Disputed adjustments follow the ordinary tax dispute route: reconsideration by the FTA, objection to the Tax Disputes Resolution Committee and then the federal courts. Strategy matters from the first information request, because the evidence filed at that stage frames the rest of the case.
Cross-border transfer pricing: Bangladesh, India, the UK, Singapore, China and the GCC
Almost every UAE related-party transaction has another tax authority on the other side, so transfer pricing in the UAE is only half of the analysis. The UAE’s wide treaty network allows double taxation to be addressed through the mutual agreement procedure, but only if the arm’s length position is documented consistently in both countries.
Bangladesh and India. Both have long-established transfer pricing regimes and active audit programmes. Service fees and royalties paid from Dhaka or Mumbai to a Dubai hub are frequent audit targets, and the authorities there will look for evidence that the UAE entity has staff and decision-makers capable of delivering the service. TRW’s Dhaka headquarters regularly coordinates on Bangladesh-facing groups.
United Kingdom and Singapore. Both apply OECD-aligned rules with demanding documentation expectations and their own minimum-tax regimes. Groups with UK or Singapore parents must align the UAE local file with the master file and with Pillar Two calculations, because pricing determines where top-up tax arises.
China and Saudi Arabia. China’s authorities scrutinise outbound service and royalty payments closely, and Saudi Arabia’s ZATCA administers its own transfer pricing bylaws. For Gulf groups with regional headquarters in Riyadh and trading hubs in Dubai, functions and people must line up with where profit is booked in each country.
Where a foreign authority adjusts first, the UAE side needs a decision on whether to seek a corresponding adjustment or treaty relief. Our customs and trade compliance team also checks that customs values for goods are consistent with transfer prices, because inconsistent values are a common audit trigger.
How TRW & Co helps with transfer pricing in the UAE
We advise UAE businesses and international groups on the legal side of pricing: the structure, contracts and governance that make a pricing position defensible, and the strategy when the FTA challenges it. Our transfer pricing in the UAE work runs alongside the group’s auditors and economists, and where representation before the UAE onshore courts is required, we work alongside locally licensed advocates.
Readiness reviews
We map related parties and connected persons, identify transactions caught by the disclosure form and test whether the existing group policy fits the UAE facts.
Intercompany agreements
We draft and refresh service, distribution, licensing, financing and cost-sharing agreements so that legal terms, conduct and pricing support each other.
Restructuring and IP moves
We structure transfers of functions, assets and intellectual property into or out of the UAE, including the use of available reliefs and their conditions.
Audits, APAs and disputes
We prepare responses to FTA information requests, support APA pre-filing discussions and run reconsideration and objection strategy when an adjustment is made.
Explore our related work on mergers and acquisitions, where transfer pricing exposure is now a standard diligence item, or browse the government’s corporate tax overview for background. The full list of our services is on our practices page.
Checklist for decision-makers
- Do we have a current map of related parties and connected persons, including family members and the entities they control?
- Have we measured related-party transactions at market value against the AED 40 million disclosure threshold?
- Does any UAE entity, or the wider group, meet the master file and local file thresholds, and could we produce both within 30 days?
- Are there signed intercompany agreements for every material flow, with true-up clauses?
- Are free zone entities pricing mainland dealings at arm’s length and keeping their own substance?
- Are shareholder and director payments benchmarked to market value?
- Have intra-group loans and guarantees been priced and documented?
- Is the UAE position consistent with the counterparty country’s documentation and with Pillar Two calculations?
- Would an APA or private clarification reduce risk on our largest recurring transaction?
If the answer to any of these is unclear, contact TRW & Co at info@trw.co.
Frequently asked questions
01Does transfer pricing apply to transactions between two UAE companies?
Yes. The arm's length principle in the Corporate Tax Law applies to related-party transactions whether the counterparty is in the UAE or abroad. Domestic pricing matters most where one party is a qualifying free zone person, has tax losses, is exempt or is outside a tax group, because mispricing shifts taxable profit. Members of a single tax group are treated as one taxable person, so transactions inside the group are generally eliminated, but qualifying free zone persons cannot join a tax group.
02When must we prepare a master file and local file?
Under Ministerial Decision No. 97 of 2023, a UAE taxpayer must maintain both files if its revenue in the tax period is AED 200 million or more, or if it belongs to a multinational group with consolidated revenue of AED 3.15 billion or more. The files are not filed with the return, but the FTA can request them and the taxpayer then has 30 days to provide them. In practice they should be complete when the return is filed.
03What is the transfer pricing disclosure form?
It is a schedule filed with the corporate tax return listing related-party transactions by category and counterparty. FTA guidance requires it where related-party transactions in the period exceed AED 40 million in aggregate, with each category above AED 4 million reported. A separate schedule covers payments and benefits to connected persons above AED 500,000. Values are counted at market value, so book entries may need adjusting before the thresholds are tested.
04Who is a connected person and why does it matter?
Connected persons include owners of the taxpayer, its directors and officers, and their related parties. Payments or benefits to them are deductible only to the extent they reflect market value and are incurred wholly and exclusively for the business. The rule targets profit extraction through excessive salaries, fees, rent or interest. It applies to owner-managed and family businesses that may never have considered transfer pricing before.
05Can we get certainty from the FTA in advance?
The FTA opened its advance pricing agreement programme with an APA Guide published on 31 December 2025. Unilateral APAs for domestic transactions came first, with cross-border and bilateral agreements planned for later phases. The guidance expects covered transactions above AED 100 million per tax period, charges an application fee of AED 30,000 and grants agreements for three to five periods. Private clarifications are an alternative for narrower questions.
06Are there specific transfer pricing penalties?
No separate transfer pricing penalty regime exists. General corporate tax administrative penalties apply for failures such as late or incorrect filings, not keeping records and not producing documents, and adjustments carry additional tax and late-payment amounts. A revised penalty framework under the tax procedures rules took effect in April 2026, so exposure should be checked against the current tables. A voluntary disclosure made before an audit generally reduces the cost.
07How does transfer pricing interact with the free zone regime?
A qualifying free zone person pays 0% only on qualifying income and must meet substance and other conditions. Transactions with mainland affiliates must be at arm's length and documented, and the free zone entity must comply with the transfer pricing rules to keep its status. Losing qualifying status can affect the current period and the following four, so pricing between free zone and mainland entities deserves board-level attention.
Sources and official materials
- Federal Tax Authority: Corporate Tax — FTA guidance, guides and forms for corporate tax and transfer pricing
- Federal Tax Authority: Legislation — Corporate Tax Law, Ministerial and Cabinet Decisions
- WAM: Ministry of Finance issues decision on transfer pricing documentation — Ministerial Decision No. 97 of 2023 thresholds
- UAE Government portal: Corporate tax — Official overview of the corporate tax regime
- Ministry of Finance — Tax policy, Pillar Two decisions and treaty information
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
