There is no single "universal" mark-up for marketing and business development services. A UAE entity that employs regional sales directors, leads brand campaigns, manages digital performance marketing or orchestrates client pitches on behalf of a foreign principal is performing a Related Party service — but tax authorities do not accept an arbitrary 5% or 10% cost-plus mark-up simply because the entity calls itself a service provider.
Under Article 34 of Federal Decree-Law No. 47 of 2022 and the FTA Transfer Pricing Guide (CTGTP1), the arm's length return turns on a functional analysis: what functions are performed, what risks are assumed, what assets are used, and whether the entity is merely providing support or actually driving high-value sales generation. If personnel negotiate customer contracts, establish binding commercial terms or develop valuable marketing intangibles, a low service mark-up on a high-value sales generator creates transfer pricing adjustment exposure and, in some cases, Permanent Establishment risk. Related questions sit in management fees and the benefit test and how to benchmark an agency commission.
Does marketing and BD support qualify for the simplified 5% mark-up?
Generally, no. Under Chapter VII of the OECD Transfer Pricing Guidelines and CTGTP1, intra-group activities that qualify for the simplified 5% cost mark-up (low value-adding intra-group services) must be of an administrative, routine or back-office nature. Sales, marketing and business development are excluded from that simplified approach because they are directly linked to the generation of core operating revenue.
The sole narrow exception involves purely routine, back-office promotional coordination — assembling event brochures, scheduling trade-show booths, or updating presentation templates under predefined global instructions without client engagement. Any outward-facing commercial interaction, campaign strategy or lead qualification has to be benchmarked using independent economic data. The OECD benefit-test framing is in intragroup services and the benefit test.
How does functional characterisation determine the remuneration model?
The arm's length return must reflect economic substance. Marketing and BD profiles typically fall into three tiers.
| Profile | Typical features | Typical remuneration |
|---|---|---|
| Routine marketing and promotional support | Coordinates regional media, advertisements, social channels and conferences under approved budgets; no direct selling, no pricing authority, no credit or inventory risk | Cost-plus on operating costs |
| Business development and lead-generation agent | Identifies clients, pitches solutions and qualifies leads; final contract is executed between the foreign principal and the customer; no authority to bind the principal | Higher cost-plus, or a commission on generated sales |
| Sales agent with binding authority | Local team can negotiate terms, set discounting limits or legally bind the foreign principal | Profit attribution / Agency Permanent Establishment analysis, not a simple service fee |
The two lighter profiles are not interchangeable with a buy-sell distributor. How those models differ is covered in distribution models and in how UAE distributors should determine arm's length margins.
What costs should be included in the cost base?
When using cost-plus or TNMM, the cost base should include the direct and indirect operating expenses incurred in delivering the service: salaries, bonuses, visa fees, gratuity, insurance and recruitment for marketing and BD staff, plus office rent, utilities, IT depreciation, marketing software, travel and client-entertainment costs.
Third-party media spend is the usual battleground. If the UAE entity buys billboard advertising, TV airtime or Google / Meta digital ads on behalf of the group, that spend should not carry a service mark-up where the entity is merely an agent or paying intermediary. Marking up pass-through media spend inflates the tested profit and is commonly disallowed by the paying jurisdiction. Only an administrative handling fee on the internal procurement labour is typically supportable.
What transfer pricing method is most appropriate?
Article 34 requires the most appropriate method on the facts.
TNMM using a full cost mark-up (or return on total costs) is the method most often applied for routine marketing and BD support. It benchmarks the net operating profit of independent service providers performing comparable functions.
The comparable uncontrolled price method is used where the UAE entity or foreign principal renders identical marketing or agency services to unrelated third parties, or where a sufficiently comparable external commission structure exists. A success-fee or sales-commission model can be arm's length if the percentage is supported by comparable agency data and reflects the local entity's actual contribution — the same exercise described for commission and agency arrangements.
What are the common audit red flags?
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Job titles that contradict the intercompany contract: the agreement describes "routine, low-risk administrative support", while email signatures and LinkedIn profiles read "Head of Regional Sales" or "VP of Business Development – MENA".
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No contemporary commercial deliverables: large marketing charges with no project briefs, campaign analytics, pitch decks or lead-tracking reports.
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Permanent Establishment exposure: BD personnel habitually concluding contracts, or playing the principal role leading to contract conclusion, on behalf of a foreign entity.
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Marking up pure pass-through media disbursements.
Where the local team develops or exploits marketing intangibles, the DEMPE analysis in transfer pricing for intangibles also needs to be on the file.
How should a UAE company document and defend its mark-up?
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A written intercompany services agreement defining scope, whether BD personnel can bind the principal, the cost base, pass-through exclusions and the mark-up or commission.
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A functional, asset and risk analysis establishing whether the entity owns core marketing intangibles and whether it assumes market, credit or inventory risk.
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An economic benchmarking study supporting the interquartile range. See selecting reliable comparables.
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General-ledger reconciliations proving that pass-through advertising expenses are segregated and recharged at cost.
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Records of actual performance: activity logs, lead hand-off records and pitch documentation showing the benefit received by the principal.
For Taxable Persons that meet the thresholds under Ministerial Decision No. 97 of 2023, this material belongs in the Local File.
Frequently asked questions
Can marketing and business development services be charged at a flat 5% mark-up?
No. The OECD Guidelines and the FTA Transfer Pricing Guide (CTGTP1) exclude sales, marketing and business development services from the 5% simplified approach for low value-adding intra-group services. An economic benchmarking study is required.
Can a UAE BD entity be paid a success fee or sales commission instead of cost-plus?
Yes, provided the commission percentage is supported by arm's length comparable data — such as independent sales-agency agreements — and reflects the actual economic contribution of the local entity.
Should third-party digital advertising spend be marked up?
No. Third-party media spend where the UAE entity acts merely as an intermediary or paying conduit should be treated as a pass-through cost recharged at zero mark-up.
Does providing BD support create a Permanent Establishment for the foreign principal?
If local BD personnel have authority to negotiate and conclude commercial contracts, or habitually play the principal role in contract closure, it can trigger an Agency Permanent Establishment under Article 14 of the UAE Corporate Tax Law and applicable tax treaties.
What is a typical arm's length mark-up range for routine marketing support?
Independent benchmarking studies commonly produce full cost mark-ups of around 6% to 10% for routine, low-risk marketing and promotional support, and around 8% to 15% for technical pre-sales and commercial lead generation. Those ranges are observations, not a safe harbour — the tested party's actual functional profile still has to sit inside a defensible comparable set.
Primary sources and further reading
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Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses — Articles 14, 34 and 55
How SBC Tax Consulting can help
SBC's transfer pricing team characterises marketing and BD support, strips pass-through media spend out of the mark-up base, and benchmarks the remaining cost-plus or commission so it can be reproduced in the Local File. International tax specialists review Agency Permanent Establishment risk where local teams negotiate or close contracts. Contact SBC before the next recharge cycle or FTA query.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.