TRW & Co · Corporate tax
Transfer Pricing in the UAE: Arm's Length Rules, Disclosure and Documentation
Transfer pricing UAE rules require related party transactions and payments to connected persons to be priced at arm's length. Many taxpayers must file a disclosure form with the corporate tax return, and businesses with revenue of at least AED 200 million, or in groups with AED 3.15 billion consolidated revenue, must keep a master file and local file.
Key pointThe disclosure form is triggered by the value of related party transactions rather than profit, so mid-sized groups with large intercompany flows often have to disclose even though they are far below the master file and local file thresholds.
At a glance
Arm's length for everyone
Every corporate tax payer must price related party transactions at arm's length under Article 34, using OECD-recognised methods or a justified alternative.
Disclosure from AED 40 million
The return's related party schedule applies where aggregate related party transactions exceed AED 40 million, with categories over AED 4 million disclosed.
Connected persons over AED 500,000
Payments or benefits to owners, directors and officers above AED 500,000 are disclosed, and amounts above market value are disallowed.
Master and local files
Ministerial Decision No. 97 of 2023 requires both where revenue is at least AED 200 million or group revenue at least AED 3.15 billion.
Free zone condition
Qualifying free zone persons must comply with transfer pricing rules to keep the 0% rate on qualifying income, and confirm compliance in the return.
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Transfer pricing UAE rules require every corporate tax payer to price transactions with related parties and payments to connected persons at arm's length, as if the parties were independent. Larger businesses must also keep a master file and local file, and many taxpayers must file a transfer pricing disclosure form with their corporate tax return. The rules sit in Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023.
This guide explains who is caught, the documentation and disclosure thresholds, how the Federal Tax Authority (FTA) tests pricing, and the practical steps for groups with UAE entities, free zone companies and owner-managed businesses. It reflects the position as of October 2026.
The short answer: what transfer pricing UAE rules require
Three obligations apply, at different levels:
- Arm's length pricing. All transactions and arrangements with related parties must meet the arm's length standard, and payments or benefits to connected persons, such as owners and directors, are deductible only to the extent they reflect market value for services actually provided.
- Disclosure in the return. A transfer pricing disclosure form forms part of the corporate tax return. According to FTA return guidance as summarised by advisers, the related party schedule applies where the aggregate value of related party transactions exceeds AED 40 million, with individual categories above AED 4 million disclosed; the connected person schedule applies where payments or benefits to a connected person and its related parties exceed AED 500,000.
- Master file and local file. Under Ministerial Decision No. 97 of 2023, these are required where the taxpayer's revenue in the tax period is at least AED 200 million, or where it belongs to a multinational group with consolidated revenue of at least AED 3.15 billion.
Below those thresholds there is no formal documentation file to maintain, but the arm's length obligation still applies and the FTA can still adjust taxable income. Keeping a short, contemporaneous explanation of the pricing is therefore sensible for everyone.
The legal framework
The rules are part of the corporate tax regime introduced by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. The key provisions are:
- Article 34 on the arm's length standard and the recognised methods for testing it;
- Article 35 defining related parties and control;
- Article 36 on payments and benefits to connected persons;
- Article 55 on transfer pricing documentation and disclosure.
Ministerial Decision No. 97 of 2023 sets the documentation thresholds and content of the master file and local file. The FTA has issued a corporate tax guide on transfer pricing and return guidance on the disclosure form, available through the FTA legislation and guides library. The Ministry of Finance remains responsible for policy and the underlying decisions.
The UAE approach follows the OECD Transfer Pricing Guidelines, which the FTA uses as a reference point where UAE guidance is silent.
Country-by-country reporting is a separate regime for very large multinational groups, with its own notification and filing requirements. Our UAE corporate tax overview explains how these pieces fit together.
Who is caught: related parties and connected persons
Related parties
Related parties include individuals linked by family relationships set out in the law, a person and an entity it controls or holds a substantial ownership interest in, entities under common control, and a person and its permanent establishment or foreign branch. Control can arise through ownership, voting rights or the ability to direct management. Partners in an unincorporated partnership are also linked. In practice, almost every group company and many family businesses have related party dealings.
Connected persons
Connected persons are the owners, directors and officers of a taxpayer, and their related parties. Payments to them, such as salaries, management fees, rent and consultancy fees, are deductible only to the extent they correspond to market value and are incurred for the business. This matters most in owner-managed companies where founders draw informal remuneration. There are exclusions, for example for certain listed entities and regulated businesses, which should be checked against the law.
The disclosure thresholds are tested on the value of transactions, not on profit, and the FTA expects categories such as goods, services, intellectual property, interest and the transfer of assets and liabilities to be captured. A group with modest profits but large intercompany flows can be inside the disclosure net for transfer pricing UAE purposes without realising it.
Transfer pricing UAE documentation compared
| Obligation | Source | When it applies | What it involves |
|---|---|---|---|
| Arm's length pricing | Articles 34 and 36, CT Law | Every related party transaction and connected person payment | Pricing consistent with independent dealings; adjustments where it is not |
| Related party schedule (disclosure form) | Article 55 and FTA return guidance | Aggregate related party transactions above AED 40 million; categories above AED 4 million disclosed | Transaction values and arm's length values by category, filed with the return |
| Connected person schedule | Article 55 and FTA return guidance | Payments or benefits to a connected person and its related parties above AED 500,000 | Disclosure of payments and market value, with non-arm's length amounts disallowed |
| Master file and local file | Ministerial Decision No. 97 of 2023 | Revenue of at least AED 200 million, or group consolidated revenue of at least AED 3.15 billion | OECD-style group overview and entity-level analysis, provided to the FTA on request |
| Country-by-country reporting | Separate CbCR regime | Very large multinational groups | Annual notification and report by jurisdiction |
How the arm's length test works
Article 34 recognises the familiar OECD methods: the comparable uncontrolled price method, the resale price method, the cost plus method, the transactional net margin method and the transactional profit split method. Another method may be used where the taxpayer can show that none of these can reasonably be applied. The taxpayer should choose the most appropriate method for the transaction, based on a functional analysis of who performs which functions, owns which assets and bears which risks.
Benchmarking typically uses commercial databases of comparable companies. Regional comparables are scarce, so analyses often draw on wider European or global data sets and adjust for differences. The FTA may adjust a result that falls outside the arm's length range. Common UAE transactions that need analysis include management and shared service charges, intercompany loans and cash pooling, distribution and commission arrangements, royalties for brands and technology, and transfers of assets and liabilities within a group.
Building a compliant transfer pricing UAE file
- Map relationships. List all related parties and connected persons, including family members, common-control entities, branches and directors, and keep the map current.
- Inventory transactions. Capture every flow by category, including non-cash benefits, guarantees, interest-free balances and asset transfers, not only invoiced items.
- Test thresholds. Check the disclosure thresholds and the master file and local file thresholds for each tax period, using group and entity revenue figures.
- Analyse and price. Prepare functional analyses, choose methods and benchmark. Put intercompany agreements in writing and make sure invoices follow them.
- Adjust before closing. Make any year-end true-ups before the financial statements are finalised, so the return and accounts tell the same story.
- Complete the disclosure form. File the related party and connected person schedules with the corporate tax return within the return deadline.
- Maintain the files. Where thresholds are met, keep the master file and local file ready to provide promptly when the FTA asks.
Handling an FTA transfer pricing query
Transfer pricing UAE audits usually begin with a request for information: intercompany agreements, the disclosure form workings, benchmarking studies and, where thresholds are met, the master file and local file. Respond within the deadline the FTA sets, and ask for an extension in writing early if documents sit with group companies abroad.
Consistency matters more than volume. The FTA will compare the return, the financial statements, the intercompany agreements and the explanations given, so prepare a short narrative that ties them together. Where an adjustment is proposed, the corporate tax law's review and objection procedures apply, and positions taken at this stage shape any later dispute before the Tax Disputes Resolution Committee or the courts. Treat the first response as the foundation of the case, not as an administrative formality.
TRW & Co works with clients' tax agents and accountants on the legal side of this work: intercompany agreements, governance and substance, and positions taken in audits and disputes. We are not a registered tax agent.
Free zones, DMTT and special cases
Qualifying free zone persons must meet the transfer pricing requirements as one of the conditions for the 0% rate on qualifying income, and the return asks them to confirm compliance. Non-arm's length dealings with mainland affiliates are a classic audit focus. Our article on the qualifying free zone person rules explains the other conditions.
Large multinational groups within scope of the domestic minimum top-up tax should align transfer pricing with their Pillar Two calculations, because intercompany pricing drives where profit and covered taxes sit. Tax groups formed under the corporate tax law are treated as a single taxable person, so transactions within the tax group are generally disregarded, but dealings with entities outside the group remain in scope.
Illustrative scenario: a regional hub with a founder-director
This scenario is illustrative only and does not describe any real business.
A Dubai mainland company acts as the regional hub of a family group headquartered abroad. It buys products from a related manufacturer, provides management services to sister companies in other GCC states, lends surplus cash to an affiliate interest-free and pays its founder-director a consultancy fee in addition to salary.
Its related party flows exceed the disclosure threshold, so it completes the related party schedule by category. The interest-free loan needs an arm's length interest analysis, and the management fee needs a cost base and mark-up supported by evidence of services actually rendered.
The founder's consultancy fee is a connected person payment above the schedule threshold, so the company must show it reflects market value for services provided, or accept a disallowance. Group consolidated revenue is below AED 3.15 billion and the company's revenue is below AED 200 million, so no master file or local file is mandatory, but the company keeps a concise documentation pack anyway to support the return.
Risks and common mistakes
Assuming small groups are outside the rules
The master file and local file thresholds are high, but the arm's length obligation applies to every taxpayer, and the disclosure schedules apply on transaction values. Many mid-sized groups and family businesses fall within the disclosure form without meeting the documentation thresholds. Without contemporaneous support, an FTA adjustment is hard to resist. Keep at least intercompany agreements, a pricing rationale and evidence that services were performed.
Treating founder pay as a private matter
Payments and benefits to owners, directors and officers are connected person payments. Above-market salaries, consultancy fees, rent for founder-owned premises and the personal use of company assets can all be disallowed to the extent they exceed market value or are not for the business. Document roles, time spent and market benchmarks, and approve remuneration formally.
Ignoring balance sheet transactions
Interest-free loans, guarantees, cash pooling and transfers of assets or liabilities are within transfer pricing UAE rules even where nothing is invoiced. Gains or losses on later realisation of assets acquired from related parties at non-arm's length values may also need adjustment. Review the balance sheet, not only the profit and loss account, when mapping transactions.
Mismatch between agreements, invoices and accounts
Intercompany agreements that say one thing, invoices that say another and accounts that record a third are a common audit finding. Align the documents, make true-ups before closing the accounts and keep board approvals. Inconsistency undermines even a sound benchmarking study, and it can also create VAT and withholding questions in the counterparty's jurisdiction.
Cross-border angle
Most UAE transfer pricing questions have a counterparty abroad. Groups with founders or parent companies in Bangladesh, India or the UK often run UAE hubs that provide services, finance or distribution to affiliates, and each of those flows is examined twice: once by the FTA and once by the counterparty's tax authority.
In practice, a management fee deductible in the UAE may be taxable income in the UK or India, and an outbound royalty may face withholding tax and its own transfer pricing scrutiny in Bangladesh, China or Singapore. Mismatched positions lead to double taxation, which treaties may relieve through mutual agreement procedures. A consistent group policy, applied in every jurisdiction, is the best defence. Our guides to permanent establishment and withholding tax and tax residency certificates cover related treaty issues.
Checklist for transfer pricing UAE compliance
- Map related parties and connected persons for each entity.
- Inventory all intra-group transactions, including loans, guarantees and asset transfers.
- Test the disclosure and documentation thresholds every tax period.
- Sign intercompany agreements and keep invoices consistent with them.
- Benchmark material transactions and record the method chosen.
- Post year-end adjustments before the accounts are finalised.
- File the disclosure schedules with the corporate tax return.
- Keep master and local files ready where thresholds are met.
- Prepare for FTA queries with a clear, indexed evidence pack.
TRW & Co advises on transfer pricing in the UAE, intercompany structuring and FTA audits and tax disputes, working alongside registered tax agents. To review your group's position, contact our Dubai team at info@trw.co or +971 58 942 1012.
Frequently asked questions
01Does transfer pricing apply to small businesses in the UAE?
Yes. The arm's length principle applies to every corporate tax payer with related party transactions or payments to connected persons, regardless of size. What varies is documentation: the master file and local file are only mandatory above the Ministerial Decision No. 97 of 2023 thresholds, and the disclosure schedules apply above set transaction values. Smaller businesses should still keep agreements and a brief pricing rationale in case the FTA asks.
02What are the master file and local file thresholds in the UAE?
Under Ministerial Decision No. 97 of 2023, a taxpayer must maintain a master file and local file if its revenue in the relevant tax period is at least AED 200 million, or if it is part of a multinational group with total consolidated group revenue of at least AED 3.15 billion in that period. The files follow the OECD format and must be provided to the FTA on request.
03When is the transfer pricing disclosure form required?
The disclosure form is part of the corporate tax return. Based on FTA return guidance as summarised by major advisers, the related party schedule applies where the aggregate value of related party transactions exceeds AED 40 million, with categories over AED 4 million disclosed individually. The connected person schedule applies where payments or benefits to a connected person and its related parties exceed AED 500,000. Check the current FTA guidance for each period.
04Who is a connected person under UAE corporate tax?
Connected persons are a taxpayer's owners, directors and officers, together with their related parties. Payments or benefits to them are deductible only to the extent they correspond to the market value of services actually provided and are incurred for the business. Certain entities, such as some listed and regulated businesses, are excluded. Owner-managed companies should benchmark founder salaries, fees and rent paid to founder-owned entities.
05Do free zone companies need to follow transfer pricing rules?
Yes. Free zone companies are corporate tax payers and must apply arm's length pricing like any other taxpayer. For qualifying free zone persons, compliance with transfer pricing rules and documentation is also a condition of the 0% rate on qualifying income, and the return asks them to confirm it. Dealings with mainland affiliates and group service charges are a common focus of review.
06What happens if my transfer pricing is not at arm's length?
The FTA can adjust the taxable income to reflect an arm's length result, which can increase corporate tax payable, and penalties may apply for incorrect returns or documentation failures. Payments to connected persons above market value can be disallowed. Corresponding adjustments may be available in some cases. Contemporaneous documentation and consistent intercompany agreements are the best way to support your position in an audit.
Sources and official materials
- Federal Tax Authority: Legislation and guides — Corporate tax law, Ministerial Decision No. 97 of 2023 and the transfer pricing guide
- Ministry of Finance: Corporate Tax — Policy, decisions and scope of the corporate tax regime
- UAE Government Portal: Corporate tax — Overview of who is subject to corporate tax
- OECD: Transfer pricing — OECD Transfer Pricing Guidelines used as a reference by the FTA
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.
