Corporate Tax

Transfer Pricing in the UAE: Rules & Documentation

2026-01-28 · 5 min read · By Aureus Worldwide

Transfer pricing rules arrived in the UAE with Corporate Tax, and they apply far more widely than many businesses assume. This guide explains the arm's length principle, who is caught, and what documentation the FTA expects.

What is transfer pricing?

Transfer pricing governs the prices charged in transactions between related parties, for example, between a parent and subsidiary, or between sister companies in a group. The concern is that connected businesses could set artificial prices to shift profit to where it is taxed least. UAE Corporate Tax addresses this through the arm's length principle.

The arm's length principle

The arm's length principle requires that transactions between related parties be priced as though they were between independent parties in comparable circumstances. If your intra-group prices differ from market terms, the FTA can adjust your taxable income to reflect what arm's length parties would have agreed.

This applies even where every entity is inside the UAE, because differences such as free-zone 0% income versus 9% mainland income create incentives to shift profit.

Related parties and connected persons

The rules reach two groups:

• Related parties, broadly, parties linked by ownership, control or kinship, including group companies and individuals with significant ownership or control
• Connected persons, owners of the business and persons related to them, plus their related parties; payments to them must also meet the arm's length standard

Common in-scope transactions include:

The transfer pricing methods

UAE rules follow the OECD's recognised methods for testing arm's length pricing:

1. Comparable Uncontrolled Price (CUP), compares to prices in comparable independent transactions
2. Resale Price Method, works back from the resale price to an independent party
3. Cost Plus Method, adds an arm's length mark-up to costs
4. Transactional Net Margin Method (TNMM), compares net profit margins
5. Profit Split Method, splits combined profit based on contribution

You select the most appropriate method for the transaction and the available data, and document why.

Documentation requirements

Documentation is tiered by size and the nature of your dealings:

• Disclosure form, many taxpayers must submit information on related-party and connected-person transactions with the Corporate Tax return
• Master File, a group-level overview of the business, intangibles and financing, required where thresholds are met
• Local File, entity-level detail on controlled transactions and the pricing analysis, required where thresholds are met
• Benchmarking, comparables analysis supporting the prices used

Thresholds for the Master and Local File depend on group revenue and entity size, so confirm current thresholds with the FTA. Even where formal files are not required, you must still apply and be able to justify arm's length pricing.

Transfer pricing is not only a big-business issue. A small UAE company paying a salary to its owner, or charging fees to a sister company, is already within the arm's length net.

Why this matters for free zones

A Qualifying Free Zone Person must comply with transfer pricing rules to keep its 0% status. Mispricing transactions between a free-zone entity and a mainland affiliate can both fail the QFZP conditions and trigger an FTA adjustment. Our Corporate Tax guide explains the QFZP regime these rules support.

Practical compliance steps

• Identify all related parties and connected persons
• Map every controlled transaction and its value
• Choose and document the most appropriate method
• Prepare or commission benchmarking for material transactions
• Complete the disclosure form with the tax return
• Prepare Master and Local Files where thresholds apply
• Keep contemporaneous documentation, refreshed each year

Aligning this work with your Corporate Tax deadlines ensures documentation is ready when the return is due, not scrambled afterwards.

Benchmarking in practice

Benchmarking is how you evidence that a price is at arm's length. For a service charge or a distribution margin, you typically search commercial databases for comparable independent companies or transactions, screen them for genuine comparability, and derive an arm's length range of margins. Your tested party's result should fall within that range; if it does not, you may need to adjust the price or explain the difference. Good benchmarking documents the search strategy, the comparables accepted and rejected, and the financial analysis, so the conclusion can be reviewed. Benchmarking studies are usually refreshed periodically, with the financial data updated annually.

Year-end adjustments and consistency

Intra-group prices set at the start of a year do not always land within the arm's length range once actual results are known. Many groups therefore make a year-end (true-up) adjustment to bring a tested party's margin back into range before the accounts close. Plan for this rather than discovering a problem after filing. Consistency also matters: the position you take for transfer pricing should align with your VAT treatment, your customs valuations and your statutory accounts. Contradictory positions across these areas are a red flag to the FTA and undermine otherwise sound documentation.

Common pitfalls

• Assuming small or wholly-UAE groups are exempt
• Charging round-number management fees with no basis
• Interest-free or off-market intra-group loans
• No benchmarking to support margins
• Documentation prepared years after the transactions

How Aureus Worldwide helps

Aureus Worldwide helps UAE businesses design compliant intra-group pricing, prepare disclosure forms, and produce Master Files, Local Files and benchmarking analysis. Our tax advisory team integrates transfer pricing with your wider Corporate Tax and free-zone strategy so your positions are consistent and defensible. To review your related-party transactions, contact our advisors.

Talk to our chartered accountants →