Corporate Tax

Transfer Pricing Documentation in the UAE

2025-12-15 · 4 min read · By Aureus Worldwide

Transfer pricing used to be a concern only for multinationals, but UAE corporate tax brought the arm's-length principle to every business that transacts with related or connected parties, from large groups to a single owner charging their own company. Under Federal Decree-Law No. 47 on Corporate Tax, related-party pricing must reflect market terms, and depending on size you may have to document that it does. Getting the documentation right is what turns a defensible position into a proven one. This guide explains UAE transfer pricing documentation: what it is, who must keep it, and how to approach it.

The foundation: the arm's-length principle

At the heart of transfer pricing is the arm's-length principle, transactions between related parties or connected persons must be priced as if they were between independent parties dealing at arm's length. The aim is to stop profit being artificially shifted between entities (for example, into a 0% free zone company or a low-tax jurisdiction) to reduce tax. If your pricing departs from market terms, the FTA can adjust your taxable income.

For the broader principles, see our transfer pricing overview.

Who counts as a related party or connected person?

The rules reach further than many expect. Broadly:

• Related parties include group companies, entities under common control, and individuals related within a defined degree
• Connected persons include owners, directors and officers of the business, and their related parties

This means even an owner-managed company must price transactions with its owner, salary, loans, asset transfers, on an arm's-length basis, and may need to evidence it.

The documentation layers

UAE transfer pricing documentation has several potential layers, with obligations scaling by size:

The thresholds that trigger the master file and local file, such as revenue levels or being part of a multinational group of a certain size, are set by the FTA. Confirm the current thresholds before deciding what you must prepare.

The disclosure form

Even where the full master/local file is not required, businesses meeting the relevant conditions must complete a transfer pricing disclosure form as part of the corporate tax return, summarising related-party and connected-person transactions. This is the FTA's first window into your related-party dealings, so consistency between the form, your accounts and any local file is essential.

Choosing and applying a pricing method

To show a transaction is at arm's length, you apply a recognised transfer pricing method, for example, comparable uncontrolled price, resale price, cost plus, transactional net margin, or profit split, selecting the most appropriate for the transaction. The analysis usually involves benchmarking against independent comparables. The method and the comparables form the backbone of your local file and should be documented contemporaneously, not reconstructed years later.

Why contemporaneous documentation matters

Transfer pricing documentation is far more credible when prepared at the time of the transactions rather than assembled during an audit. Contemporaneous records:

• Show the pricing was set on a rational, market basis
• Provide a ready defence if the FTA reviews your position
• Reduce the risk of adjustments and penalties

Leaving documentation until the FTA asks is a weak position, because it looks reactive and may rely on hindsight.

Common pitfalls

• Assuming transfer pricing is only for multinationals, connected-person rules catch owner-managed companies
• Owner transactions (salary, loans, asset transfers) priced without analysis
• Free zone companies forgetting TP is a condition of the 0% QFZP regime
• Inconsistency between the disclosure form, the accounts and the local file
• No benchmarking to support the chosen pricing
• Documentation prepared after the fact

Transfer pricing is now a mainstream UAE compliance area, not a multinational niche. If you transact with related parties or connected persons, assume the arm's-length principle applies to you and document accordingly.

It connects to groups and free zones

Transfer pricing intersects with other parts of the regime. Within a corporate tax group, intra-group transactions are eliminated, but dealings outside the group still need arm's-length pricing. And for a Qualifying Free Zone Person, TP compliance is an explicit condition of the 0% rate. Because thresholds and documentation rules are set by the FTA and can change, confirm the current requirements before finalising your approach.

How Aureus Worldwide helps

Aureus Worldwide prepares UAE transfer pricing documentation, disclosure forms, local files and master files where required, selects and applies appropriate pricing methods, and benchmarks your related-party transactions. Our tax team, with our accounting and CFO services, ensures your TP position is consistent across your return, accounts and documentation, and defensible in an FTA review. To put your transfer pricing on a solid footing, contact us.

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