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Transfer Pricing in UAE: Rules, Documentation, and Compliance Guide (2025)
Tulpar Global Taxation provides end-to-end Transfer Pricing in UAE (TP Solutions) that help UAE businesses maintain compliance and enhance tax efficiency. Our services include benchmarking analysis, related party transaction reviews, and TP documentation under the UAE Tax Law covering the Local File, Master File, and Country-by-Country Reporting (CbCR). With strong expertise in UAE tax laws and global standards, we deliver tailored TP strategies that minimize risk, ensure compliance, and optimize tax outcomes.
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Complexities of Transfer Pricing in UAE
In today’s competitive business environment, especially in the context of the UAE’s evolving tax regime, understanding the importance of transfer pricing has never been more critical. With the introduction of corporate tax regulations such as Federal Decree‑Law No. 47 of 2022 (the “UAE CT Law”) and Ministerial Decision No. 97 of 2023, companies operating in the United Arab Emirates (including free zone entities) are subject to detailed rules on inter-company and intra-group pricing.
Business owners, finance professionals and tax consultants in the UAE must therefore embrace robust transfer pricing strategies and documentation to ensure compliance, mitigate risk and optimise operations. Firms like Tulpar Global Taxation (with branches in Dubai, Sharjah and Ajman) and experts such as Ezat Alnajm, a transfer pricing specialist in Dubai, are playing key roles in guiding UAE businesses through this terrain.
This guide will help you navigate the full spectrum of transfer pricing in Dubai, UAE from fundamentals and key concepts, through the legal framework and methods, to required documentation, transactional scenarios, compliance risks, and future outlook.
What is Transfer Pricing and Why is it Critical for UAE Businesses?
Transfer pricing refers to the pricing of goods, services, intangible assets, financing transactions and other value transfers between members of a multinational enterprise (MNE) or between related parties and connected persons. It ensures that transactions with affiliated entities are conducted on terms consistent with those that would apply between independent parties i.e., in accordance to meet the arm’s length principle.
In the UAE context, transfer pricing is critical because:
- It directly impacts taxable income and therefore the corporate tax burden under the UAE Corporate Tax Law.
- It supports free zone entities (including Qualifying Free Zone Persons) in preserving entitlement to 0 % corporate tax relief when applicable provided the arm length principle and the related documentation are met.
- It aligns the UAE with global tax transparency, BEPS (Base Erosion and Profit Shifting) and multilaterally accepted standards via the Organisation for Economic Co‑operation and Development (OECD) Transfer Pricing Guidelines, thereby reducing the risk of double taxation, audit exposure and reputational risk.
- Failing to meet transfer pricing regulations in UAE may lead to adjustments by the Federal Tax Authority (FTA), denied deductions, increased tax liabilities, penalties and heightened scrutiny.
For UAE-based business owners, finance teams and tax advisers, mastering transfer pricing laws in UAE means staying ahead of compliance, protecting profitability and strengthening governance.
The Evolution of Transfer Pricing in the UAE: A New Era of Compliance
The UAE’s transfer-pricing regime is relatively new, but evolving rapidly.
The key milestones include:
- The enactment of the UAE CT Law via Federal Decree-Law No. 47 of 2022, which introduced transfer pricing laws under Chapter 10 (“Transactions with Related Parties and Connected Persons”).
- The issuance of Ministerial Decision No. 97 of 2023, which provides specific regulations for maintaining transfer pricing documentation requirements and other formalities.
- The publication of the UAE Transfer Pricing Guide by the FTA on 23 October 2023 (UAE TP Guide), which offers detailed guidance and aligns domestic rules with the OECD TP Guidelines.
- A growing emphasis on transparency, global minimum tax regime considerations, cross-border transactions, free zone integration and interconnectedness with other compliance obligations (such as economic substance and country by country reporting).
As the regime matures, businesses operating in the United Arab Emirates must adopt a proactive stance rather than a reactive one.
Understanding the Fundamentals: Key Concepts of UAE Transfer Pricing
The Arm’s Length Principle: The Cornerstone of UAE Transfer Pricing
At the heart of the UAE’s transfer pricing regime is the arm’s length principle (ALP). Article 34 of the UAE CT Law stipulates that transactions between related party and associated person must be conducted on terms consistent with those between independent parties engaged in comparable transactions.
In practical terms this means:
- Identifying comparable uncontrolled transactions (if available) and analysing whether the terms, pricing, functions, assets and risks are consistent.
- Selecting and applying appropriate transfer pricing methods to arrive at an arm’s length result.
- Documenting and justifying the rationale for the method, assumptions made, adjustments applied and the selected tested party.
- Demonstrating that any deviation falls within an arm’s length range or is fully explained (e.g., outlier results due to legitimate commercial reasons).
Identifying Scope: Related Parties and Connected Persons under UAE CT Law
The scope of transfer pricing rules in the UAE hinges on the correct identification of “Related Parties” and “Connected Persons”.
According to the UAE Corpoarte Tax Law and supporting guidance:
- Related Parties include natural persons within the fourth degree of kinship, individuals and juridical persons with direct or indirect ownership of 50 % or more, control relationships, partnerships and trust-structures.
- Associated persons include a director or officer of the taxable person, the owner, any related party of those, and certain partnerships/unincorporated entities where relationships exist.
- Importantly, transactions between entities that are commonly owned or controlled by a Federal or Local Government in the UAE may be excluded from the related-party definition for Transfer Pricing purposes.
Understanding who counts as a related party or connected person is critical to determining whether transfer pricing rules apply, including the obligation to apply the arm’s length principle and maintaining TP documentation.
Controlled Transactions: Defining the Boundaries of Transfer Pricing Rules
The term “controlled transactions” in the UAE refers to any transaction or arrangement between a taxable person and a related party or connected person where the terms or conditions differ from what would apply between independent parties. The UAE TP Guide also sets out that this includes goods and services, intangibles, financing, cost allocation, restructurings and intra-group arrangements.
All such controlled transactions, including cross border, domestic and free-zone related-party transactions, must satisfy the arm’s length standard. Importantly, the burden lies on the taxpayer to demonstrate that the controlled transaction is arm’s length and to maintain contemporaneous documentation for transfer pricing in UAE.
Federal Tax Authority (FTA) and Ministry of Finance: Key Authorities
The two primary authorities governing transfer pricing in the UAE are:
- The Federal Tax Authority (FTA), which issues the TP Guide, administers tax filings, audits and documentation requirements for taxable persons.
- The Ministry of Finance (MoF), which issues legislation such as the UAE CT Law and Ministerial Decision No. 97 of 2023, and oversees overall tax policy and treaties.
Together, these authorities shape the regulatory, enforcement and compliance landscape for transfer pricing in Dubai, UAE.
The UAE Legal Framework: Shaping Transfer Pricing Compliance
Federal Decree-Law No. 47 of 2022: Corporate Tax and Transfer Pricing Provisions
The UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) sets out the foundation for corporate tax and includes specific provisions related to transactions to related parties and connected persons (Chapter 10, Articles 34-36) and documentation obligations (Article 55).
Key features include:
- The arm’s length principle requirement for transactions with related parties & connected persons.
- Requirement for tax deductions to be denied if payments to connected persons are not arm’s length.
- The obligation for taxable persons to maintain appropriate documentation and make disclosures even if thresholds aren’t met, though thresholds determine full obligations.
Cabinet Decision No. 97 of 2023: Specific Regulations for Transfer Pricing
Ministerial Decision No. 97 of year 2023 supplements the UAE Corporate Tax Law by providing greater clarity around transfer pricing documentation thresholds, methodologies, disclosures and timing. For example, it ou
]tlines when a local file, master file and disclosure form must be prepared. It also embeds the three-tiered documentation approach (master file, local file, country-by-country report) and the requirement to file a transfer pricing disclosure form alongside the tax filing.
Integration with OECD Transfer Pricing Guidelines and BEPS Actions
The UAE’s TP regime is aligned with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, allowing where domestic guidance is silent reference to OECD standards. The UAE is also part of the global BEPS initiative, meaning its TP regime emphasises transparency, documentation, avoidance of double taxation and aligning taxable profits with economic substance.
The UAE’s Approach to International Taxation and MNE Groups
For multinational enterprises (MNEs) with UAE operations:
- Country-by-Country Reporting (CbCR) applies to groups whose consolidated global revenues exceed AED 3.15 billion (approx. USD 858 million) and where the UAE resident ultimate parent entity (UPE) is responsible for submission.
- The definition of free-zone persons (Qualifying Free Zone Persons) is subject to adherence to TP rules as a condition to benefit from zero-rate corporate tax relief.
- Concepts such as tax groups, permanent establishments (PEs) and cross-border intra-group transactions are all addressed in the UAE TP framework.
Applying Arm’s Length: Accepted Transfer Pricing Methods in the UAE
Overview of OECD-Approved Transfer Pricing Methods
The UAE Corporate Tax Law, aligned with OECD guidelines, recognizes five primary transfer pricing methods, as detailed in Article 34(3). These methods help businesses determine arm’s length prices for related-party transactions. Additionally, Article 34(4) allows the use of alternative methods when the standard methods are not applicable, provided they meet the arm’s length principle. Below, we explore each method in detail to help you choose the right approach for your business.
Under Article 34(3) of the UAE CT Law, five internationally recognised transfer pricing methods may be applied:
- Comparable Uncontrolled Price (CUP) Method
- Resale Price Method (RPM)
- Cost Plus Method (CPM)
- Transactional Net Margin Method (TNMM)
- Profit Split Method (PSM)
The UAE TP Guide confirms that if none of these methods can be applied reliably, alternative methods may be used, provided the arm’s length principle is still satisfied.
Comparable Uncontrolled Price - CUP Method: Direct Comparability
The CUP method involves comparing the price charged in a controlled transaction with the price of a comparable uncontrolled transaction between independent entities. This method is preferred where reliable third-party comparable data exists. In the UAE context, taxpayers should ensure that comparability adjustments are made (if needed) and that the source of comparables is well documented and justifiable.
How the Transfer Pricing CUP Method Works
The CUP method requires identifying comparable transactions in terms of product, market conditions, and contractual terms. For example, if a UAE subsidiary sells machinery to its parent company, the price should match what an independent buyer would pay for similar machinery in the UAE market. The method also takes into account the functions performed, assets used, and risks assumed in the transaction. According to the OECD Transfer Pricing Guidelines, the CUP method compares the price in a comparable uncontrolled transaction, ensuring fairness in pricing between related parties. Ezat Alnajm notes that this method is ideal for commodity transactions where market prices are readily available.
When to Use the CUP Method
- Suitable for tangible goods, services, or financial transactions with clear market benchmarks.
- Requires high-quality, comparable data, which may be challenging for unique products or services.
- Tulpar Global Taxation recommends using the CUP method for standardized transactions to minimize audit risks.
Advantages and Challenges
- Advantages: Highly accurate when comparable data exists. Preferred by tax authorities for its transparency.
- Challenges: Limited availability of comparable data in some industries. Requires detailed market analysis, which can be time-consuming.
Resale Price Method (RPM): Focus on Gross Margin
The RPM begins with the resale price to an independent customer, subtracts an appropriate gross margin, and adjusts for any functions performed by the reseller. The residual margin is then attributed to intra-group activities. It is commonly used for distributors with limited functions.
How the Transfer Pricing RPM Method Works
This method is commonly used when a UAE entity purchases goods from a related party and resells them to an independent party. The resale price is reduced by an appropriate gross margin to determine the arm’s length price for the initial transaction. For example, if a Dubai distributor buys products from its parent company and resells them, the margin should align with industry standards.
When to Use the RPM
- Ideal for distributors or resellers with minimal value-added functions.
- Suitable when the reseller does not significantly transform the product.
- Ezat Alnajm advises using RPM for retail and wholesale businesses in the UAE.
Advantages and Challenges
- Advantages: Simplifies analysis for resellers with straightforward operations. Less reliant on precise transactional data than the CUP method.
- Challenges: Requires accurate gross margin data from comparable transactions. May not suit complex supply chains with significant value addition.
Cost Plus Method (CPM): Cost-to-Cost Basis with a Mark-up
Under the CPM, the cost incurred by the supplier of goods or services to a related party is increased by an appropriate mark-up to reflect what an independent supplier would earn. This is often used in manufacturing or services where cost and mark-up structures are evident.
How the Transfer Pricing CPM Method Works
This method is used when a UAE entity provides goods or services to a related party. The supplier’s costs (e.g., production or service delivery costs) are increased by a markup that reflects what an independent supplier would charge. For instance, a UAE manufacturing subsidiary supplying parts to its parent company would apply a markup consistent with industry norms.
When to Use the CPM
- Best for manufacturing, service provision, or low-risk distribution.
- Suitable when cost data is reliable and comparable markups are available.
- Tulpar Global Taxation suggests CPM for businesses with standardized cost structures.
Advantages and Challenges
- Advantages: Straightforward for businesses with clear cost records. Widely accepted by tax authorities for routine transactions.
- Challenges: Requires accurate cost allocation and industry benchmark data. May not account for intangible contributions or market fluctuations.
Transactional Net Margin Method (TNMM): Profitability at a Net Level
The TNMM assesses the net profit margin of the tested party relative to an appropriate base (e.g., costs, sales). It is particularly useful when there is a lack of reliable comparables for gross margin methods. The UAE TP Guide recognises TNMM as an acceptable method.
How the Transfer Pricing TNMM Method Works
This method examines the net profit margin relative to an appropriate base (e.g., sales, costs, or assets) in a controlled transaction. For example, a UAE subsidiary providing marketing services to its parent company would compare its profit margin to that of independent marketing firms. Ezat Alnajm highlights TNMM’s flexibility for complex transactions.
When to Use the TNMM
- Suitable for transactions with limited comparable price data.
- Ideal for service providers, distributors, or manufacturers with unique functions.
- Tulpar Global Taxation recommends TNMM for businesses with diverse operations.
Advantages and Challenges
- Advantages: Flexible and widely applicable across industries. Less dependent on precise transactional data.
- Challenges: Requires robust benchmarking and functional analysis. May involve disputes over appropriate profit indicators.
Profit Split Method (PSM): Dividing Combined Profits
The PSM splits the combined profits (or losses) of related parties generated by controlled transactions, in proportion to the functions performed, assets employed and risks assumed. This method is particularly relevant for highly integrated operations, intangible-rich businesses or where both parties contribute unique value.
How the Transfer Pricing PSM Method Works
This method is used when transactions are highly integrated or involve unique intangibles, such as intellectual property. The total profit from the transaction is split based on each party’s contribution to value creation. For example, a UAE company collaborating with its parent company on a patented product would allocate profits based on their respective roles.
When to Use the PSM
- Ideal for complex transactions involving intangibles or joint ventures.
- Suitable when other methods are not applicable due to lack of comparables.
- Ezat Alnajm advises PSM for high-value, unique transactions in the UAE.
Advantages and Challenges
- Advantages: Accounts for contributions of intangible assets and complex operations. Ensures fair profit allocation in integrated business models.
- Challenges: Requires detailed functional and economic analysis. Can be subjective, leading to potential disputes with tax authorities.
Alternative Methods for Unique Transactions
When the five standard methods are not suitable, Article 34(4) of the UAE Corporate Tax Law allows businesses to use alternative methods, provided they satisfy the arm’s length principle. These methods require robust justification and documentation to withstand Federal Tax Authority FTA scrutiny. Tulpar Global Taxation can assist in developing tailored methodologies to meet these requirements.
Selecting the Most Appropriate Method: A Practical Approach (Functional Analysis)
Selecting the correct transfer pricing method in the UAE requires a robust functional analysis assessing the functions performed, assets employed and risks assumed by each party. The tested party, comparability adjustments, data selection and benchmarking must align with local documentation requirements. The decision must be well-documented, justifiable and contemporaneous. Non-compliance may trigger adjustment by the FTA.
Comprehensive Transfer Pricing Documentation Requirements
Proper documentation is critical for demonstrating compliance with UAE transfer pricing rules. The FTA mandates that businesses maintain a master file, local file, and, in some cases, a country-by-country (CbC) report, depending on revenue thresholds. Know the importance of comprehensive documentation to avoid penalties and audits.
The Three-Tiered Documentation Approach: OECD BEPS Action 13
In line with OECD BEPS Action 13, the UAE requires a tiered documentation approach:
- Master File: Group-wide overview of the MNE group’s global business operations, TP policy, intangible structure, financing and allocation of functions/assets/risks.
- Local File: Entity-specific documentation covering the local entity’s controlled transactions, financial results, benchmarking, comparability analysis, method selection, tested party and adjustments.
- Country-by-Country Reporting (CbCR): For large multinational groups whose consolidated revenues exceed AED 3.15 billion, a CbCR must be filed by the UAE resident UPE on behalf of constituent entities.
Master File: Group-Wide Information for Multinational Enterprises (MNE Group)
When a UAE-based constituent entity is part of a global group whose consolidated revenue exceeds AED 3.15 billion, or when a UAE entity’s annual revenue exceeds AED 200 million, a master file must be prepared. The master file gives the FTA insight into the MNE’s global value chain, intangible assets, financing arrangements, and TP policies enabling benchmarking and risk assessment across the group. The master file provides a high-level overview of the multinational group’s global operations, including:
The master file provides a high-level overview of the multinational group’s global operations, including:
- Organizational structure
- Business strategies and value drivers
- Intangible assets and financial information
Businesses with global revenues above AED 3.15 billion must prepare a master file annually. Tulpar Global Taxation offers expert guidance to ensure your master file meets FTA and OECD standards.
Key components of the Master File include:
- Organizational Structure: Details of your group’s legal and ownership structure, including all entities and their locations.
- Business Overview: A description of your group’s operations, business strategies, and key drivers of profit.
- Intangible Assets: Information on intellectual property, patents, and trademarks that impact pricing.
- Financial Activities: Details of intra-group financing arrangements and policies.
- Transfer Pricing Policies: An explanation of the methods used to set prices for intercompany transactions.
Local File: Entity-Specific and Transactional Details
The local file is required when the thresholds are met (as above) and must include:
- Description of the local entity’s business, controlled transactions, commercial rationale.
- Financial information (profit and loss, balance sheet) for the tax period.
- Benchmarking analysis, method selection, functional analyses, comparability adjustments, tested party rationale, range of results and explanation of where results fall with respect to the range.
- A copy of the TP disclosure form submitted with the corporate tax return.
Companies with revenues exceeding AED 200 million or those part of a multinational group must prepare a local file annually. The FTA may request this file within 30 days during an audit, so proactive preparation is essential.
Key elements of the Local File include:
- Entity Overview: A description of the UAE entity’s role within the group, including functions performed, assets used, and risks assumed.
- Transaction Details: Specifics of all related-party transactions, including the nature, terms, and value of each transaction.
- Economic Analysis: A comparability analysis to justify the arm’s length nature of your pricing, often supported by benchmarking studies.
- Financial Data: Detailed financial information for the UAE entity, including profit margins and transaction values.
It is advised that the Local File is critical for demonstrating compliance during FTA audits. With Tulpar Global Taxation, you can ensure your Local File is comprehensive and audit-ready.
Country-by-Country Reporting (CbCR): Global Overview for Large MNE Groups
For MNE groups with consolidated global revenue above AED 3.15 billion and a UAE resident ultimate parent entity (UPE), the CbCR obligation applies. It must be filed within 12 months following the end of the reporting fiscal year in the prescribed template. This report provides an overview of the group’s income, taxes paid, and economic activities across jurisdictions. Tulpar Global Taxation can streamline the preparation of CbC reports to ensure compliance.
Best Practices for Transfer Pricing Documentation UAE
- Start Early: Prepare documentation at the time of filing corporate tax returns to avoid last-minute errors.
- Use Expert Support: Engage consultants like Ezat Alnajm to conduct functional and economic analyses.
- Maintain Bilingual Records: Documents can be in English or Arabic, but accuracy is critical.
- Conduct Regular Reviews: Update documentation to reflect changes in business operations or market conditions.
Non-compliance can result in penalties, including fines and adjusted taxable profits. Tulpar Global Taxation, the best transfer pricing company in UAE, provides end-to-end documentation services to mitigate these risks.
The UAE Transfer Pricing Disclosure Form: Mandatory Submission and Details
Taxable persons in the UAE who have transactions with related parties and connected persons must complete a TP disclosure form (TPDF) and submit it alongside their return. The form requires key information on controlled transactions, methods adopted, and price adjustments.
Integration with Corporate Tax Returns: Ensuring Consistent Reporting
The TP disclosure form must be consistent with the corporate tax return submitted to the FTA. Failure to align reported figures may lead to FTA queries and possible adjustments.
Timing and Language Requirements for Documentation Submission
The UAE CT Law mandates that Transfer Pricing documentation should be prepared contemporaneously “at the time of the transaction or within the period of filing the CT return”. The FTA may request submission of documentation within 30 days (or as facilitated) of request. While no specific language requirement is prescribed in all cases, supporting documentation in English or Arabic is generally acceptable; however, translations may be needed if requested by the FTA.
Step-by-Step Guide to Preparing Your Transfer Pricing Master File
Creating a Master File that meets UAE and OECD standards requires careful planning and attention to detail. Here’s a step-by-step guide to help you get it right, with insights from Tulpar Global Taxation, the best transfer pricing company in the UAE.
Step 1: Map Your Group’s Organizational Structure
Start by outlining your multinational group’s structure, including all entities, their locations, and ownership relationships.
This section should include:
- A chart or diagram showing the legal and ownership structure.
- Details of each entity’s role within the group (e.g., manufacturer, distributor, service provider).
- Information on any changes in the group structure during the financial year.
This step sets the foundation for your Master File, providing context for your transfer pricing strategies. Tulpar Global Taxation can assist in creating a clear and accurate organizational chart that aligns with FTA requirements for maintaining compliance.
Step 2: Describe Your Business Operations
Next, provide a detailed overview of your group’s global business activities.
This includes:
- Key products, services, or intellectual property driving revenue.
- Major markets and geographic presence.
- Business strategies, such as cost leadership or innovation-driven growth.
This section helps tax authorities understand how value is created within your group. Be sure to highlight any unique expertise or intangible contributions, as these can significantly impact pricing decisions.
Step 3: Detail Intangible Assets and Financial Arrangements
Intangible assets like patents, trademarks, or proprietary technology play a big role in transfer pricing.
Document:
- The nature and ownership of intangible assets.
- How these assets are used in intercompany transactions.
- Any intra-group financing arrangements, such as loans or guarantees.
Clear Transfer Pricing documentation of intangible assets can prevent disputes with tax authorities. Tulpar Global Taxation offers expert guidance in identifying and valuing these assets for compliance.
Step 4: Outline Transfer Pricing Policies
Explain the methods used to set prices for intercompany transactions. The UAE accepts five OECD-approved methods:
- Comparable Uncontrolled Price (CUP): Compares prices with similar transactions between unrelated parties.
- Resale Price Method: Focuses on the resale margin earned by a distributor.
- Cost Plus Method: Adds a markup to the costs incurred by the supplier.
- Transactional Net Margin Method (TNMM): Compares profit margins with those of comparable companies.
- Profit Split Method: Allocates profits based on each entity’s contribution to value creation.
Include a rationale for choosing each method and how it aligns with the arm’s length principle. Tulpar Global Taxation can conduct benchmarking studies to support your pricing methodology.
Step 5: Consolidate and Review
Compile all sections into a cohesive Master File and review it for accuracy and completeness. Ensure the document is updated annually to reflect changes in your group’s operations or structure. Ezat Alnajm recommends involving a transfer pricing expert in UAE to review your Master File for compliance with TP regulations.
How to Prepare Your Transfer Pricing Local File
The Local File is where you prove that your UAE entity’s transactions are arm’s length. Here’s how to prepare a robust Local File that stands up to FTA scrutiny, with insights from Tulpar Global Taxation.
Step 1: Provide an Overview of the UAE Entity
Start with a detailed description of your UAE entity’s role within the group. Include:
- Functions performed (e.g., manufacturing, distribution, or services).
- Assets employed, such as factories, equipment, or intellectual property.
- Risks assumed, such as market or operational risks.
This functional analysis is critical for justifying your pricing decisions. Tulpar Global Taxation can help you conduct a thorough functional and risk analysis to strengthen your Local File.
Step 2: Document Related-Party Transactions
List all transactions between your UAE entity and related parties, both domestic and cross-border. For each transaction, include:
- The nature of the transaction (e.g., sale of goods, provision of services).
- Terms and conditions, including payment terms and contractual agreements.
- Transaction values, including gross amounts and any adjustments.
Be as specific as possible to demonstrate transparency. Ezat Alnajm advises maintaining clear records of all agreements to avoid discrepancies during audits.
Step 3: Conduct a Comparability Analysis
A comparability analysis compares your transactions with similar transactions between unrelated parties. This involves:
- Identifying comparable transactions or companies.
- Analyzing factors like product similarity, market conditions, and economic circumstances.
- Using databases to benchmark your pricing against industry standards.
Tulpar Global Taxation has access to extensive databases for conducting benchmarking studies, ensuring your pricing is defensible.
Step 4: Include Financial Data
Provide detailed financial information for your UAE entity, including:
- Revenue and profit margins from related-party transactions.
- Financial statements or extracts showing transaction impacts.
- Any adjustments made to align with the arm’s length principle.
This data helps the FTA assess whether your pricing reflects market conditions. Ezat Alnajm recommends regular monitoring to catch variances early and avoid year-end adjustments.
Step 5: Submit and Maintain
The Local File must be prepared annually and submitted to the FTA within 30 days upon request. Keep it updated and readily accessible for audits. Tulpar Global Taxation offers end-to-end support, from preparation to submission, ensuring your Local File meets all regulatory requirements.
Specific Transactional Scenarios and Transfer Pricing Implications
Intra-group Services: Management, IT, Marketing, and Administrative Support
Transactions where one group entity provides services (e.g., management oversight, IT, marketing, administrative support) to another related entity require careful pricing. The cost/mark-up, benefit test and economic justification must align with the arms length principle. Documentation must reflect the nature of services, benefits received and basis of charging.
Intra-group Services: Management, IT, Marketing, and Administrative Support
Intercompany financing transactions (loans, guarantees, cash-pooling) are within scope of UAE TP rules. Interest rates, guarantee fees, debt-equity ratios and terms must reflect what independent parties would agree. The UAE TP Guide highlights the need for functional analysis of financing arrangements.
Intercompany Sales of Goods and Tangible Assets
When related parties trade goods or tangible assets, the pricing must reflect independent comparable transactions (e.g., via CUP or RPM methods). Stocking models, transfer of inventory and profit margins must align with what independent parties would apply.
Transactions Involving Intangible Assets: Royalties, Licences, and R&D
Transactions involving intangible assets (royalties, licences, cost-contribution arrangements, R&D) require heightened scrutiny. In the UAE, the TP Guide emphasises that the assumption of risk, ownership of intangible assets, expected returns and contribution must be documented and benchmarked accordingly. Failure to do so may trigger adjustment by the FTA.
Business Restructurings: Impact on Transfer Pricing Policies and Documentation
Business re-organisations (such as free-zone migrations, changes in functional profile, intra-group asset transfers) may trigger TP implications in the UAE. The TP regime requires review of whether the restructuring gives rise to a change in functions/risks/assets, and whether compensation or adjustment is required to satisfy the arm’s length principle.
Permanent Establishments (PEs): Allocating Profits and TP Rules
UAE resident entities with cross-border operations may have permanent establishments (PEs) in other jurisdictions. The transfer pricing rules apply to transactions with these PEs, and allocation of profits must reflect independent party behaviour. The TP Guide provides clarity on this interplay.
TP Compliance, Risk Management & Audits in the UAE
The Burden of Proof: Taxpayer’s Responsibility to Demonstrate Arm’s Length
In the UAE, the onus is on the taxable person to demonstrate that related party transactions or connected persons satisfy the arm’s length principle. If the FTA invokes a transfer pricing adjustment, the taxpayer must justify comparability analysis, method selection, benchmarking, adjustments and outcome.
Federal Tax Authority (FTA) Enforcement: The Scope of TP Audits
The FTA has authority to audit and adjust a taxpayer’s taxable income where controlled transactions are not arm’s length or documentation is inadequate. The FTA may also request correspondence adjustment where a foreign tax authority has made an adjustment.
What to Expect During Transfer Pricing Audits: Information Requests
During a TP audit in the UAE, the FTA may request:
- Controlled transaction schedules (goods, services, financing, intangibles).
- TP disclosure form and supporting documentation (master file, local file, CbCR).
- Benchmarking reports, comparability studies, selection rationale.
- Inter-company agreements, accounting records, board minutes, functional reviews.
- Evidence of contemporaneous documentation, method selection and arm’s length outcome.
Common Pitfalls and Best Practices for Audit Preparation
Common pitfalls include: insufficient documentation, failure to benchmark properly, incorrect identification of related parties/connected persons, lack of economic substance, thin functional analysis and unreported intra-group transactions.
Best practices: prepare documentation early, adopt robust internal TP policies, ensure alignment with UAE TP thresholds, maintain audit-ready files, involve expert advisors (for example, a firm like Tulpar Global Taxation providing transfer pricing advisory in UAE) and review intra-group pricing periodically.
Penalties for Non-Compliance with Transfer Pricing Rules and Documentation
Failure to comply with TP documentation or disclosure requirements can lead to penalties. For example, Cabinet Decision No. 75 of 2023 states fines (e.g., AED 10,000 for certain violations, and AED 20,000 for repeat within 24 months) for record-keeping and information failures under the Tax Procedures Law. Additionally, non-compliance may result in denial of deductions, adjustment to taxable income, loss of free zone tax relief, increased audit exposure and reputational consequences.
Non-compliance with UAE transfer pricing regulations can lead to significant consequences, including financial penalties and reputational damage. The FTA imposes fines of 5-10% of adjusted profits for non-compliant transactions, along with potential audits and tax adjustments. Inadequate documentation is a common trigger for FTA audits.
Proactive Transfer Pricing Risk Reviews
Companies in the UAE should conduct proactive TP risk reviews: identify all controlled transactions, map related-party relationships (including connected persons), benchmark pricing, review functional profiles, check documentation thresholds and prepare a remediation plan ahead of audits.
Interplay with Economic Substance Requirements (ESR)
While distinct, the UAE’s Economic Substance Regulations (ESR) and TP regime may overlap: intangible-rich activities, intra-group services and financing may trigger both ESR and TP obligations. Ensuring coherence between substance, transfer pricing and tax structure is vital.
Dispute Resolution Mechanisms and Advance Pricing Agreements (APAs)
Navigating Transfer Pricing Disputes: Overview of Options
Should a taxable person disagree with a TP adjustment by the FTA or a foreign tax authority, the UAE TP framework provides mechanisms for resolution, including the right to request a corresponding adjustment when a foreign tax authority has adjusted the income of a UAE entity.
Mutual Agreement Procedures (MAPs): Resolving Double Taxation under Treaties
For cross-border transactions, where TP adjustments may result in double taxation, tax treaties and MAPs can be used to resolve issues between competent authorities. Taxpayers are encouraged to leverage MAPs as part of their TP dispute-resolution strategy.
Advance Pricing Agreements (APAs): Certainty and Risk Mitigation
While the UAE’s APA regime is still evolving, adopting an APA prior to a controlled transaction can provide certainty on transfer pricing methodology, pricing outcome and audit exposure. Taxpayers should monitor FTA guidance on APA availability and criteria.
The Future of Transfer Pricing UAE: Staying Ahead
The future of transfer pricing in Dubai, UAE is one of increasing sophistication, transparency and alignment with global standards.
Key trends include:
- Enhanced digital filing and disclosure requirements (including real-time monitoring of controlled transactions).
- Closer integration of TP with global minimum tax rules (Pillar 2) and broader BEPS actions.
- Greater scrutiny of intangible transactions, intra-group financing and free zone related-party transactions.
- Growing importance of economic substance, digital economy indicators and data analytics in Transfer Pricing assessment in UAE.
- Evolving guidance from the FTA and MoF, including further elaboration of APA framework, benchmark database expectations and industry-specific TP policies.
For UAE business owners, finance professionals and tax consultants, maintaining a forward-looking transfer pricing strategy with regular reviews, robust documentation and alignment with commercial reality will be essential. Partnering with experienced advisors such as Tulpar Global Taxation and leveraging the insights of specialists like Ezat Alnajm will further enhance your compliance posture and competitive edge.
Final Take-away
Transfer pricing is no longer a back-office technicality, it is a core pillar of tax compliance, risk management and strategic planning within the UAE. By embracing the arm’s length principle, aligning with the UAE’s evolving legal framework, adopting appropriate TP methods, maintaining contemporaneous documentation and staying audit-ready, businesses will protect value, preserve tax positions and thrive in the UAE’s dynamic tax environment.
Under the UAE CT regime, taxpayers are required to comply with transfer pricing practices and understand the definition of related parties, which depends on the degree of kinship or affiliation between entities. Businesses are required to maintain proper documentation and are required to prepare and submit relevant reports, must consider VAT and other UAE tax obligations. The UAE MoF has clarified that business establishments outside the UAE may be impacted by the new corporate tax, depending on their structure. While small business relief may reduce the amount of tax payable, those exceeding the threshold must apply the standard corporate tax rate in line with the updated transfer pricing UAE corporate tax framework.
How Tulpar Global Taxation Can Help
At Tulpar Global Taxation, we provide comprehensive transfer pricing services in UAE designed to help businesses in the UAE comply with local and international tax regulations while optimizing their global tax position. Our team of experienced tax professionals assists companies in developing compliant transfer pricing strategies, preparing documentation, and managing audits effectively.
Our Transfer Pricing Services Include:
Prepare transfer pricing documentation and reports
Benchmarking studies to determine arm’s-length pricing
Transfer pricing policy design and implementation
Intercompany agreement review and advisory
Transfer pricing audit support and risk assessment
Why Choose Tulpar for Transfer Pricing in Dubai, UAE?
Local expertise with global experience in transfer pricing regulations and practices
Deep understanding of UAE Corporate Tax and OECD guidelines
Tailored strategies that align with your business model and industry
Transparent, compliant, and cost-effective solutions and Transfer Pricing Planning
Dedicated professionals committed to helping you minimize risks and ensure compliance with proper Transfer Pricing Reports.
📞 Contact Us for a Consultation
Whether you’re setting up TP documentation for the first time or need expert guidance to align with UAE’s corporate tax requirements, Tulpar Global Taxation is here to help in overall Transfer pricing arrangements and taxation of corporations and businesses.
Get in touch today to schedule your personalized consultation and ensure your transfer pricing framework meets all regulatory standards.
FAQs:
What is transfer pricing in the UAE and why is it important for businesses?
Transfer pricing refers to the pricing of transactions between related parties within a multinational group. In the UAE, it matters because the Corporate Tax Law requires all related-party transactions to be conducted at arm’s length. Proper transfer pricing ensures compliance, avoids penalties, and improves audit readiness. Many UAE companies work with advisors like Tulpar Global Taxation to maintain accurate documentation.
Are transfer pricing regulations mandatory in the UAE under the new Corporate Tax Law?
Yes. The UAE Corporate Tax Law makes arm’s length pricing and transfer pricing documentation mandatory for businesses meeting certain thresholds. Companies may need to prepare a Local File, Master File, and disclosure forms depending on their turnover and group structure.
Which UAE businesses are required to follow transfer pricing rules?
Transfer pricing rules apply to UAE companies conducting transactions with related parties or connected persons, including:
- Free zone entities
- Mainland companies
- Multinational groups
- Family-owned UAE businesses
If your company has cross-border or intra-group dealings, you will likely fall under transfer pricing regulations. Tulpar Global Taxation can help determine your exact compliance requirements.
What is the arm’s length principle under UAE Corporate Tax?
The arm’s length principle requires that transactions between related parties be priced as if they were between independent companies. This ensures fair taxation and prevents profit shifting. The UAE follows OECD guidelines when assessing arm’s length compliance.
What documents are required for transfer pricing compliance in the UAE?
Depending on thresholds, a UAE business may need to maintain:
- Transfer Pricing Disclosure Form
- Local File (LF)
- Master File (MF)
- Arm’s length benchmarking analysis
These documents support your pricing strategy during audits. Firms such as Tulpar Global Taxation assist companies in preparing compliant documentation.
What happens if a UAE company fails to comply with transfer pricing requirements?
Non-compliance may lead to:
- Administrative penalties
- Tax reassessments
- Adjustments to taxable income
- Increased audit scrutiny
Having proper transfer pricing documentation helps minimize risk.
How do UAE free zone companies handle transfer pricing?
Free zone entities are also subject to transfer pricing rules, especially if they interact with related mainland or international entities. Even companies maintaining 0% tax status must provide arm’s length pricing and documentation when required.
How do I prepare a transfer pricing policy for my UAE business?
A strong transfer pricing policy typically includes:
- Functional and risk analysis
- Industry and economic benchmarking
- Selection of appropriate transfer pricing methods
- Documentation and reporting plans
Many UAE companies rely on specialists like Tulpar Global Taxation to build policies aligned with OECD standards and UAE Corporate Tax regulations.
Are intra-group loans and management fees covered under transfer pricing rules in UAE?
Yes. Intra-group services, loans, royalties, management fees, and intellectual property transactions all fall under transfer pricing regulations. They must be priced at arm’s length and supported with evidence.
How can businesses in the UAE stay compliant with transfer pricing regulations?
UAE companies can ensure compliance by:
- Mapping all related-party transactions
- Maintaining accurate transfer pricing documentation
- Updating benchmarking studies periodically
- Filing required disclosure forms on time
Advisory firms like Tulpar Global Taxation offer ongoing compliance support to help businesses stay audit-ready.
