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16/12/2025
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Transfer pricing plays a pivotal role in the UAE’s corporate tax landscape, particularly for businesses with international operations or transactions with related parties. With the introduction of the UAE Corporate Tax Law (UAE CT Law), the government has introduced a more structured transfer pricing (TP) framework, aligning it with global standards. This blog provides an in-depth overview of the key aspects of transfer pricing regulations, focusing on the documentation requirements, compliance, and the impact of the new corporate tax laws on businesses.
Transfer pricing refers to the pricing of transactions between related parties or entities within the same corporate group. This includes the transfer of goods, services, or intellectual property (IP). In simpler terms, transfer pricing is the amount one part of a company charges another for products, services, or intellectual property within the same group. These transactions could be either domestic or international, but they must adhere to certain tax laws to ensure fair and transparent pricing.
In the UAE, the government has adopted the OECD (Organisation for Economic Co-operation and Development) guidelines on transfer pricing to ensure that multinational businesses comply with global standards. This helps prevent tax avoidance through manipulated prices and ensures fair tax liabilities are maintained.
The foundation of UAE transfer pricing rules is ensuring that transactions reflect market conditions.
Transfer Pricing in UAE: This is the pricing set for controlled transactions (transfer of goods, services, or IP) among related parties or connected persons within a group, covering both domestic and international dealings.
Arm's Length Principle (ALP): The central tenet, requiring intercompany pricing to mirror terms agreed upon by independent parties in an open market. The Federal Tax Authority (FTA) enforces this.
Related Parties and Connected Persons: The UAE CT Law defines these broadly. Article 36 specifically addresses payments to connected persons, requiring disclosure if the aggregate value exceeds the materiality threshold of AED 500,000. The TP guide provides clarity that substance over form prevails.
Transfer pricing in the UAE significantly impacts multinational businesses, as it governs how transactions between related entities within the same corporate group are priced. For companies with subsidiaries or branches operating in multiple countries, including the UAE, adhering to transfer pricing regulations is essential to avoid tax disputes and ensure compliance with local tax laws. The UAE has adopted the OECD guidelines on transfer pricing, which requires businesses to apply the arm’s length principle when determining pricing for intercompany transactions, ensuring that the terms and conditions reflect what would be agreed upon between independent parties in a competitive market.
In summary, transfer pricing in the UAE can affect multinational businesses by imposing strict documentation, pricing rules, and compliance requirements. While these regulations are designed to prevent tax evasion, they also require businesses to dedicate significant resources to maintaining accurate records and aligning their pricing strategies with local and international standards.
The introduction of the UAE Corporate Tax Law marks a fundamental shift in the taxation of corporations. Central to this new framework are the stringent transfer pricing practices, which demand that all transactions between related parties or connected persons adhere to the Arm's Length Principle (ALP). This guide offers an in-depth look at UAE tax regulations, supporting documentation requirements, and compliance obligations for Multinational Enterprises (MNEs) operating under the UAE CT regime.
The Comparable Uncontrolled Price (CUP) method is considered one of the most reliable and direct methods for transfer pricing. It compares the price charged in a controlled transaction to the price charged in a comparable uncontrolled transaction between unrelated parties. The CUP method is ideal when there are clear market prices for the goods, services, or intangibles being transferred. However, this method may be challenging to apply if there are no easily comparable transactions available.
The Cost Plus Method is often used for transactions involving the provision of services or the transfer of tangible goods. Under this method, the transfer price is based on the cost incurred by the supplier of the goods or services, plus a markup that reflects the profit margin that would be charged in an uncontrolled transaction. This method is commonly used for low-value-adding services and intra-group financing arrangements.
The Resale Price Method is frequently used in situations where the selling entity in the controlled transaction resells the goods or services to an unrelated third party. This method focuses on the resale price of the product, deducting an appropriate gross margin to determine the arm's length price. The gross margin reflects the value added by the reseller in the supply chain.
The Transactional Net Margin Method (TNMM) is often used when other methods, such as the CUP method, are difficult to apply due to the lack of comparables. Under this method, the net margin (e.g., operating profit) achieved by a tested party in a controlled transaction is compared to the net margin of independent entities engaged in similar transactions. TNMM is widely used for assessing the pricing of intra-group services and intangible assets.
The foundation of UAE transfer pricing rules is ensuring that transactions reflect market conditions. The Arm's Length Principle (ALP) is the central tenet, requiring intercompany pricing to mirror terms agreed upon by independent parties in an open market. This aligns UAE rules with OECD transfer pricing guidelines. The Federal Tax Authority (FTA) enforces this.
Related Parties and Connected Persons: The UAE CT Law defines these broadly. Related Parties are defined by ownership, management control, or the ability to exercise control (e.g., based on debt or profit sharing). Connected Persons are addressed under Article 36, requiring disclosure if the aggregate value of payments exceeds the materiality threshold for this tp, which is AED 500,000. The tp guide emphasises that substance over form prevails.
Transfer Pricing in UAE significantly governs how transactions between related entities are priced. Multinational enterprises (MNEs) must adhere to strict documentation, pricing rules, and compliance requirements to avoid tax disputes with the FTA. The regulations require dedicated resources to maintain accurate records and align overall transfer pricing policies with local and international standards. Business establishments outside the UAE that transact with UAE entities are also impacted.
Maintaining TP documentation is a strategic compliance imperative. Failure to meet these obligations can lead to severe penalties, fines (e.g., AED 10,000 to AED 100,000 for failing to submit required forms), and tax adjustments. The documentation should be prepared contemporaneously.
The key documents for transfer pricing compliance are:
Master File: Provides a global overview of the MNE Group's organizational structure, financial data, and overall transfer pricing policies.
Local File: Focuses on the specific transactions that took place in the UAE entity. It requires a functional analysis of the parties and detailed support for the TP methods used to demonstrate transfer pricing compliance with the ALP.
The FTA issued the Transfer Pricing Guide (CTGTP1) on October 23, 2023, which helps tax authorities understand and apply the TP rules aligned with the OECD TP Guidelines. To reduce risk, businesses can pursue Advance Pricing Agreements (APAs) with the FTA to agree on pricing guidelines for multinational enterprises for specific transactions or periods in advance, providing corporate tax positions certainty.
Compliance is tied directly to the fiscal cycle. The TP rules apply to tax periods starting on or after June 1, 2023. Finance professionals and tax consultants must advise clients that the required documentation must be prepared contemporaneous tp documentation with the transactions occurring within the respective tax period.
Core Concepts and Scope of UAE Transfer Pricing
Transfer Pricing in UAE refers to the pricing set for controlled transactions (transfer of goods, services, or intellectual property (IP)) among related parties or connected persons within the same corporate group, covering both domestic and international dealings. The tp guide highlights that the scope is broad, governing not only transactions between subsidiaries but also those involving connected persons as defined under Article 36 of the UAE CT Law.
To achieve clear transfer pricing, businesses must apply recognized OECD methods. Common methods include CUP, Cost Plus, Resale Price, and TNMM.To reduce the risk of future disputes with tax administrations, MNEs can proactively seek certainty through Advance Pricing Agreements (APAs) with the FTA. Engaging specialized transfer pricing services from a reputable best transfer pricing company is recommended to ensure the documentation is robust and defensible under FTA scrutiny.
Controlled transactions fall under the TP scope if they occur between related parties or connected persons. The law is broad, covering the pricing of goods, financing (intra-group financing), and provision or availing of services.
Related Parties: Defined by ownership, management control, or the ability to exercise control (defined by $>$ 50% voting rights, profit entitlement, or board composition).
Connected Persons: Article 36 of the UAE CT Law addresses payments to connected persons, where the ALP must still apply. Disclosure requirements exist even for payments to connected persons exceeding a materiality threshold (specifically, aggregate value exceeding AED 500,000).
The UAE's key Transfer Pricing concepts center on the Arm's Length Principle (ALP), requiring related-party transactions (including domestic ones) to be priced as if they were between independent entities. Compliance is mandatory and is evidenced through documentation requirements like the Transfer Pricing Disclosure Form, Master File, and Local File, based on revenue thresholds, aligning with OECD standards.
→ Transfer Pricing in UAE: This refers to the pricing of controlled transactions (transfer of goods, services, or intellectual property (IP)) between related parties or connected persons within the same corporate group, whether domestic or international.
→ Arm's Length Principle (ALP): This is the core requirement. It dictates that intercompany transaction pricing must be comparable to what would be agreed upon between independent parties in an open, competitive market. The Federal Tax Authority (FTA) enforces this principle.
→ Related Parties and Connected Persons: The UAE CT Law provides specific definitions for these, which may go beyond simple ownership to include situations of control or significant influence (e.g., based on debt or profit sharing), as detailed in Article 35 and Article 36 of the UAE CT Law. The TP Guide expands on these, showing that substance over form prevails.
The introduction of the UAE Corporate Tax Law marks a fundamental shift in the taxation of corporations and businesses in the Emirates. Central to this new framework are the stringent transfer pricing laws, which demand that all transactions between related parties or connected persons adhere to the arm's length principle (ALP). This detailed guide incorporates all specified terms to offer an in-depth look at UAE TP regulations, documentation, and compliance obligations, particularly for multinational enterprises (MNEs) operating in the UAE context.
The UAE Corporate Tax Law requires businesses to maintain thorough and accurate transfer pricing documentation. Failure to comply with these requirements can result in severe penalties, tax adjustments, and disputes with the Federal Tax Authority (FTA). By preparing the required documentation and ensuring compliance with the arm’s length principle, businesses can minimize the risk of penalties and avoid costly tax adjustments.
The FTA issued the TP Guide (CTGTP1) to interpret the transfer pricing rules and OECD transfer pricing guidelines. To reduce risk and gain certainty on complex arrangements, businesses in the UAE can pursue Advance Pricing Agreements (APAs), allowing them to agree on pricing methodology for specific transactions in advance. This demonstrates commitment to transfer pricing compliance and minimizes the chance of future disputes with tax authorities. The UAE MoF oversees this framework.
Non-compliance carries tangible risks beyond just tax adjustments. Penalties can be severe, ranging from financial fines (AED 10,000 to AED 100,000 for failing to submit required forms) to the loss of free zone tax benefits where free zone tax exemptions are in play.
Deadlines are tied to the corporate tax return filing. The Transfer Pricing Disclosure Form must be submitted alongside the tax return. The documentation itself (Master File and Local File) must be prepared contemporaneously and maintained. The Ministerial Decision No. 97 of 2023 provides the legal basis for these documentation rules.
Transfer pricing is an essential aspect of compliance for businesses operating in the UAE, especially with the introduction of the new corporate tax regime. At Young & Right, we offer comprehensive solutions to help businesses navigate the complexities of transfer pricing arrangements, ensuring full compliance with the UAE corporate tax laws.
We assist multinational enterprises in establishing robust transfer pricing arrangements that align with the UAE corporate tax rate and global best practices. Our team ensures that these arrangements meet the arm's length principle and reflect the true economic substance of intercompany transactions. This is critical for UAE resident ultimate parent entities, ensuring they comply with the local tax rules and avoid any potential audits or penalties.
One of the key requirements for multinational enterprises is the submission of a transfer pricing master file, which provides a comprehensive overview of the group's global transfer pricing policies and practices. Young & Right supports businesses in preparing and submitting this master file to the UAE Federal Tax Authority (FTA), ensuring that all required documentation is accurate and complete.
As a global business hub, transfer pricing in Dubai is subject to strict regulatory oversight. Our team offers expert guidance on the threshold for transfer pricing disclosure required for entities operating in Dubai, helping you stay on top of local regulations. We assist in filling out the disclosure form alongside the tax return, ensuring that your transfer pricing practices are fully disclosed to the FTA in a timely and accurate manner.
For multinational enterprises and tax administrations, we provide a detailed TP guide that outlines all the necessary steps and best practices for complying with UAE transfer pricing laws. This guide includes everything from document preparation to ensuring proper compliance with local and international tax rules.
At Young & Right, we help businesses comply with transfer pricing requirements by regularly reviewing intercompany transactions, adjusting pricing strategies where necessary, and preparing the necessary forms for submission. Our team ensures that every UAE entity under your group remains compliant with the disclosure form requirements, reducing the risk of penalties and enhancing your reputation with tax authorities.
With our expertise, businesses can confidently navigate the complexities of transfer pricing and ensure they meet all regulatory requirements for a smooth and compliant operation in the UAE.
Tax obligations under the new CT regime are significant. Businesses must move beyond simple filing and embed the ALP into daily operations. Ensuring all documentation, including the Local File and Master File, is robust and defensible is crucial to minimize risks and maintain credibility with the FTA. The guidance contained within the TP Guide offers clarity on complex areas, including domestic dealings.
Get expert advice from Young & Right to navigate the complexities of transfer pricing arrangements, master files, and disclosure requirements in the UAE corporate tax landscape.
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