Transfer pricing compliance in the UAE rests on one principle: transactions between Related Parties and Connected Persons must be priced as if the parties were unrelated. Federal Decree-Law No. 47 of 2022, Ministerial Decision No. 97 of 2023 and the FTA Transfer Pricing Guide (CTGTP1) turn that principle into concrete obligations — identifying counterparties, documenting pricing, filing disclosures and, for larger businesses, maintaining a Master File and Local File.
This guide walks through what compliance actually requires, end to end. For the coverage tests that sit underneath it, start with who is covered and which transactions are included.
What is the legal basis for transfer pricing in the UAE?
The arm's length principle is set out in Article 34 of the Corporate Tax Law: the results of a transaction between Related Parties must be consistent with what unrelated parties would have agreed in comparable circumstances. Article 35 defines Related Parties, Article 36 defines Connected Persons, and Article 55 sets the documentation and disclosure obligations.
Ministerial Decision No. 97 of 2023 then fills in the thresholds and content requirements, and the FTA Transfer Pricing Guide explains how the FTA expects the rules to be applied in practice. The FTA Corporate Tax FAQs confirm that the analysis can apply to domestic as well as cross-border dealings.
Who has to comply?
Any Taxable Person under UAE Corporate Tax that transacts with a Related Party or Connected Person is within scope. There is no minimum revenue threshold for the arm's length principle itself. Revenue thresholds only determine whether a Master File and Local File must be formally prepared and maintained — not whether the arm's length rule applies.
What counts as a Related Party or Connected Person transaction?
Related Party transactions cover dealings between entities or individuals connected by ownership of 50% or more, control, or (for natural persons) kinship up to the fourth degree. Connected Person transactions cover payments or benefits to owners, directors, officers and their Related Parties.
In practice this reaches intercompany sales and services, financing arrangements, royalties and licensing, cost-sharing agreements, and director or shareholder remuneration. See how to identify Related Parties and Connected Persons under UAE Corporate Tax.
What documentation is required, and at what size does it scale up?
Every Taxable Person must be able to support its related-party pricing on request, typically through a benchmarking study and a short transfer pricing policy. A Taxable Person that is part of an MNE Group with consolidated global revenue of AED 3.15 billion or more, or whose own standalone revenue is AED 200 million or more, must additionally prepare and maintain a Master File and Local File.
Those files must be producible within 30 days of an FTA request and retained for seven years. They are prepared and retained, then submitted only if the FTA specifically requests them — they are not filed with the tax return.
A documented policy and documentation file serve different jobs. Businesses need both.
What has to be disclosed with the Corporate Tax return?
Two disclosure schedules sit alongside the arm's length rule:
| Schedule | Trigger | What is disclosed |
|---|---|---|
| Related Party transactions | Aggregate Related Party transactions exceed AED 40 million | Each category above AED 4 million, disclosed separately |
| Connected Persons | Aggregate payments to a Connected Person (with that person's Related Parties) exceed AED 500,000 | Nature, value and Market Value basis of the payments or benefits |
Dividends between Related Parties are excluded from both the AED 40 million and AED 4 million disclosure thresholds. The arm's length principle can still be relevant to other aspects of the relationship. Crossing a disclosure threshold is not the same as becoming subject to Article 34 — the pricing rule already applied.
Which transfer pricing methods does the FTA recognise?
The FTA follows the OECD's five recognised methods, and a business should be able to explain why the chosen method best fits the tested transaction:
| Method | Typical use |
|---|---|
| Comparable Uncontrolled Price (CUP) | Where a reliable internal or external comparable price exists |
| Resale Price Method | Routine distribution of goods |
| Cost Plus Method | Routine manufacturing or service provision |
| Transactional Net Margin Method (TNMM) | The most commonly used method for UAE distribution and service transactions |
| Transactional Profit Split Method | Highly integrated or unique-contribution arrangements |
There is no mandated default. TNMM is widely used for routine UAE distribution and service transactions because it is less sensitive to product-level differences than CUP. Method selection should follow the functional analysis, not a habit. The OECD Transfer Pricing Guidelines remain the international methodology reference.
How often does the compliance work need to be refreshed?
Comparable financial data is refreshed annually against the existing comparable set. The full comparable search is generally re-run every three years, or immediately if the tested party's functions, the transaction type, or the group structure changes materially in between.
Treating a benchmarking study as a one-time exercise is one of the fastest ways to fall out of compliance. A study that is never refreshed, or a Related Party that is never re-tested against the AED 40 million threshold as revenue grows, are the two most common ways businesses drift out of compliance without a deliberate decision to do so.
What happens if a business gets it wrong?
Non-compliance carries two layers of risk. The FTA can adjust taxable income to an arm's length result, removing any tax benefit obtained. Administrative penalties apply separately for late or incomplete disclosure, and for failing to maintain or produce a Master File and Local File within the 30-day window.
An unrefreshed or unsupported benchmarking study is one of the most common audit findings even where the original pricing was reasonable. Operationalising the policy through to the invoice is what keeps the file consistent with the books.
How should a UAE finance team start?
A strong transfer pricing position starts with the transaction itself. Identify what was actually supplied, who performed the work, where the people and assets were located, which entity carried the commercial risk, and what the accounting records show. The tax result should come after that fact pattern is clear.
Then build a transaction inventory: each Related Party and Connected Person, the contractual terms, the annual value and the pricing method currently used. Compare that list with the general ledger, intercompany confirmations, contracts and tax-return disclosures. Differences between those records are often more important than a small difference in the final margin.
What should management review before signing off?
Management should be able to answer five practical questions:
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What Related Party transactions occurred?
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Why did the group choose the pricing method?
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What evidence supports the price or margin?
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Does the actual year-end result remain within the intended policy?
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Can the business reproduce the analysis if the FTA asks for it?
A senior review should also consider changes during the year. A new shareholder, financing arrangement, distribution model, acquisition, intellectual property arrangement or business strategy can affect comparability. A study prepared in January does not automatically remain appropriate in December.
A practical action plan for UAE groups
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Map all Related Parties, Connected Persons and transaction categories against the legal-entity structure and general ledger.
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Document the commercial facts, including functions, assets, risks, contractual terms and actual conduct.
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Select and document the most appropriate transfer pricing method and explain why it fits the transaction.
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Test the pricing or margin against reliable comparable evidence and record why material comparables were accepted or rejected.
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Reconcile the final result to the statutory accounts, intercompany invoices and Corporate Tax return data.
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Complete the relevant disclosure and documentation checks before the filing process is closed, and retain supporting evidence in an accessible audit file.
Frequently asked questions
Does every UAE company need a Master File and Local File?
No. Only businesses that meet the AED 200 million standalone revenue threshold, or belong to an MNE Group with AED 3.15 billion or more in consolidated revenue, must formally prepare and maintain both. Smaller businesses still need to support their pricing on request, just not in that specific format.
Do the Master File and Local File need to be filed with the tax return?
No. They are prepared and retained, then submitted only if the FTA specifically requests them, within 30 days of that request.
Are dividends treated as Related Party transactions for disclosure purposes?
Dividends between Related Parties are excluded from both the AED 40 million and AED 4 million disclosure thresholds, though the arm's length principle can still be relevant to other aspects of the relationship.
Which transfer pricing method should a UAE business default to?
There is no mandated default, but TNMM is the most widely used method for routine UAE distribution and service transactions because it is less sensitive to product-level differences than CUP.
What is the fastest way to fall out of compliance?
Treating a benchmarking study as a one-time exercise. A study that is never refreshed, or a Related Party that is never re-tested against the AED 40 million threshold as revenue grows, are the two most common ways businesses drift out of compliance without a deliberate decision to do so.
Primary sources and further reading
How SBC Tax Consulting can help
SBC's transfer pricing team helps UAE businesses identify in-scope transactions, set documentation at the right scale, complete Related Party and Connected Person disclosures, and keep benchmarking current. Corporate tax specialists align the same file with the return. Contact SBC before the next filing or FTA information request.
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.