Every business engaged in related-party transactions in the UAE has to price those deals at arm’s length. This means that the price must be identical to what independent parties would agree under similar circumstances.
The rules are a part of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and came into force from financial years starting on or after 1 June 2023. The FTA adheres to the OECD Transfer Pricing Guidelines. Compliance with documentation requirements will help you ensure protection of your business in case of an audit and avoid any corrections and/or penalties.
This guide describes what documentation requirements for related party transactions in the UAE are, key thresholds, content of each file, and practical measures to follow the rules.
What’s the Arm’s Length Principle in UAE Transfer Pricing?
The arm’s length principle forms the basis of every UAE transfer pricing rule. All transactions between related parties or connected persons must be priced at arm’s length.
Related parties include companies that are under common control, subsidiaries, parent companies and entities that have a significant influence on a company’s decisions. Connected persons include directors and shareholders as well as certain relatives.
Common related-party transactions include:
- Intercompany loans and interest
- Management fees and shared services
- Sale or purchase of goods
- Royalties and intangible asset charges
- Cost-sharing arrangements
The FTA can adjust the taxable income if you price your transaction outside the arm’s length range.
Who Must Comply with UAE Transfer Pricing Documentation Rules?
All taxable persons with related-party or connected-person transactions are required to apply the arm’s length principle. The more transactions and the larger the business, the more documentation is required.
UAE thresholds for relevant documentation as provided in Ministerial Decision No. 97 of 2023:
| Requirement | When It Applies | What You Must Do |
| Transfer Pricing Disclosure Form | If aggregate related-party transactions are more than AED 40 million, then any category exceeding AED 4 million must also be disclosed.Separately, payments/benefits to a connected person exceeding AED 500,000 must be disclosed | Submit this form together with your Corporate Tax return. |
| Local File + Master File | If your UAE company’s revenue is AED 200 million or more, oryou are part of a multinational group earning AED 3.15 billion or more | Prepare both files and keep them ready; submit within 30 days if the FTA asks. |
| Country-by-Country Report (CbCR) | If your UAE company is the ultimate parent of a multinational group earning AED 3.15 billion or more | File the CbCR every year with the Ministry of Finance. |
Even businesses below these thresholds must keep basic records showing that pricing follows the arm’s length principle.
Transfer Pricing Disclosure Form Requirements
The Transfer Pricing Disclosure Form (sometimes called the Related-Party schedule) is filed with the annual Corporate Tax return.
It requires disclosure of:
- Names and places of residence of related parties
- Nature and value of all material categories of transactions
- Method of transfer pricing applied
- A statement that the transactions comply with the arm’s length principle
The filing deadline is nine months after the close of the tax period. Non-filing or filing incomplete documents can lead to penalties.
Master File Requirements in the UAE
The Master File contains an overview of the multinational group. A Master File and Local File are required if the UAE taxable person has revenue of AED 200 million or more or is a part of a Multinational Enterprise (MNE) Group with total consolidated group revenue of AED 3.15 billion or more.
Common information included in the Master File is:
- Organisation of the group and ownership
- Overview of the group’s business, value drivers, and key markets
- Intangible assets, IP strategy, and locations of research & development
- Financing policy and intercompany financings
- Consolidated financial statements
- List of all Advance Pricing Agreements or any other ruling applicable
The Master File should be prepared on time and maintained for use by the FTA.
Local File Requirements for Controlled Transactions
The Local File is entity-specific and covers controlled transactions of the UAE entity. This is the most critical document in the context of FTA review.
The Local File should typically include:
- Description of the business of the UAE entity, its management and the industry it operates in
- Detailed function analysis (functions performed, assets used and risks assumed)
- Description of the related-party transactions
- Choice and explanation of the transfer pricing method selected
- Comparability analysis and benchmarking study
- Information about the financials of the transactions, including reconciliations to the accounting records
- Copies of intercompany agreements
Documentation should be contemporaneous, i.e., prepared at the moment the transactions took place.
Country-by-Country Reporting (CbCR)
UAE-resident ultimate parent entities of large multinational groups must file a Country-by-Country Report. The report shows revenue, profit, tax paid, employees, and assets for every jurisdiction in which the group operates.
A separate CbC notification is also required. The threshold is the same AED 3.15 billion consolidated group revenue.
Deadlines and Submission Rules
- Disclosure Form → filed along with the Corporate Tax return (most commonly within 9 months after year-end)
- Master File and Local File → prepared and submitted within 30 days of an FTA request
- CbCR → submitted annually according to the Group Tax Year
- Records must be kept for a minimum of 7 years
Penalties
Failure to maintain or submit the required transfer pricing documentation may lead to:
- Administrative sanctions
- Reversal of the burden of proof in an audit
- Income adjustments, which increase the taxes payable under the corporate tax
- In more serious cases, other sanctions
Preparing the files accurately in advance is far less expensive than putting together the documents under duress.
Practical Steps to Prepare Compliant Transfer Pricing Documentation
- Identify all related parties and related persons
- List all material related-party transactions
- Carry out a functional analysis of all major transaction groups
- Select the most appropriate transfer pricing method (CUP, Cost Plus, Resale Price, TNMM or Profit Split)
- Carry out benchmarking studies using credible databases
- Draft intercompany agreements which accurately reflect the substance of the transaction
- Prepare the Disclosure Form, Local File and Master File (if applicable)
- Review and update the files annually, or if there are significant changes
Free zone and Qualifying Free Zone Persons are subject to the same rules. The 0% rate on qualifying income does not automatically mean they are exempt from the arm’s length test in their transactions with related parties.
How Moores Rowland Dubai UAE Can Help You with Transfer Pricing Compliance in Dubai
Preparation of transfer pricing documentation is a technical and time-sensitive process. Mistakes and omissions might result in adjustments, penalties, and extended FTA review.
We at Moores Rowland assist companies and multinational groups in the UAE in the following areas:
- Assessment of applicability of the documentation thresholds
- Preparation of Transfer Pricing Disclosure Forms, Local Files, and Master Files
- Functional analysis and benchmarking studies
- Drafting and review of intercompany agreements
- Responses to FTA information requests
- Coordination of transfer pricing policies with the UAE Corporate Tax and free zones’ requirements
Our team consists of professional tax consultants who have complete knowledge of the local regulations and practical experience in different aspects of corporate, tax, and advisory services.
Do you need assistance with transfer pricing documentation in the UAE?
Get in touch with us at Moores Rowland UAE for a review of your related party transactions and professional assistance with preparing compliant transfer pricing documentation.
Visit our website or book an appointment with our tax and corporate experts.
Every business engaged in related-party transactions in the UAE has to price those deals at arm’s length. This means that the price must be identical to what independent parties would agree under similar circumstances.
The rules are a part of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and came into force from financial years starting on or after 1 June 2023. The FTA adheres to the OECD Transfer Pricing Guidelines. Compliance with documentation requirements will help you ensure protection of your business in case of an audit and avoid any corrections and/or penalties.
This guide describes what documentation requirements for related party transactions in the UAE are, key thresholds, content of each file, and practical measures to follow the rules.
What’s the Arm’s Length Principle in UAE Transfer Pricing?
The arm’s length principle forms the basis of every UAE transfer pricing rule. All transactions between related parties or connected persons must be priced at arm’s length.
Related parties include companies that are under common control, subsidiaries, parent companies and entities that have a significant influence on a company’s decisions. Connected persons include directors and shareholders as well as certain relatives.
Common related-party transactions include:
- Intercompany loans and interest
- Management fees and shared services
- Sale or purchase of goods
- Royalties and intangible asset charges
- Cost-sharing arrangements
The FTA can adjust the taxable income if you price your transaction outside the arm’s length range.
Who Must Comply with UAE Transfer Pricing Documentation Rules?
All taxable persons with related-party or connected-person transactions are required to apply the arm’s length principle. The more transactions and the larger the business, the more documentation is required.
UAE thresholds for relevant documentation as provided in Ministerial Decision No. 97 of 2023:
| Requirement | When It Applies | What You Must Do |
| Transfer Pricing Disclosure Form | If aggregate related-party transactions are more than AED 40 million, then any category exceeding AED 4 million must also be disclosed.Separately, payments/benefits to a connected person exceeding AED 500,000 must be disclosed | Submit this form together with your Corporate Tax return. |
| Local File + Master File | If your UAE company’s revenue is AED 200 million or more, oryou are part of a multinational group earning AED 3.15 billion or more | Prepare both files and keep them ready; submit within 30 days if the FTA asks. |
| Country-by-Country Report (CbCR) | If your UAE company is the ultimate parent of a multinational group earning AED 3.15 billion or more | File the CbCR every year with the Ministry of Finance. |
Even businesses below these thresholds must keep basic records showing that pricing follows the arm’s length principle.
Transfer Pricing Disclosure Form Requirements
The Transfer Pricing Disclosure Form (sometimes called the Related-Party schedule) is filed with the annual Corporate Tax return.
It requires disclosure of:
- Names and places of residence of related parties
- Nature and value of all material categories of transactions
- Method of transfer pricing applied
- A statement that the transactions comply with the arm’s length principle
The filing deadline is nine months after the close of the tax period. Non-filing or filing incomplete documents can lead to penalties.
Master File Requirements in the UAE
The Master File contains an overview of the multinational group. A Master File and Local File are required if the UAE taxable person has revenue of AED 200 million or more or is a part of a Multinational Enterprise (MNE) Group with total consolidated group revenue of AED 3.15 billion or more.
Common information included in the Master File is:
- Organisation of the group and ownership
- Overview of the group’s business, value drivers, and key markets
- Intangible assets, IP strategy, and locations of research & development
- Financing policy and intercompany financings
- Consolidated financial statements
- List of all Advance Pricing Agreements or any other ruling applicable
The Master File should be prepared on time and maintained for use by the FTA.
Local File Requirements for Controlled Transactions
The Local File is entity-specific and covers controlled transactions of the UAE entity. This is the most critical document in the context of FTA review.
The Local File should typically include:
- Description of the business of the UAE entity, its management and the industry it operates in
- Detailed function analysis (functions performed, assets used and risks assumed)
- Description of the related-party transactions
- Choice and explanation of the transfer pricing method selected
- Comparability analysis and benchmarking study
- Information about the financials of the transactions, including reconciliations to the accounting records
- Copies of intercompany agreements
Documentation should be contemporaneous, i.e., prepared at the moment the transactions took place.
Country-by-Country Reporting (CbCR)
UAE-resident ultimate parent entities of large multinational groups must file a Country-by-Country Report. The report shows revenue, profit, tax paid, employees, and assets for every jurisdiction in which the group operates.
A separate CbC notification is also required. The threshold is the same AED 3.15 billion consolidated group revenue.
Deadlines and Submission Rules
- Disclosure Form → filed along with the Corporate Tax return (most commonly within 9 months after year-end)
- Master File and Local File → prepared and submitted within 30 days of an FTA request
- CbCR → submitted annually according to the Group Tax Year
- Records must be kept for a minimum of 7 years
Penalties
Failure to maintain or submit the required transfer pricing documentation may lead to:
- Administrative sanctions
- Reversal of the burden of proof in an audit
- Income adjustments, which increase the taxes payable under the corporate tax
- In more serious cases, other sanctions
Preparing the files accurately in advance is far less expensive than putting together the documents under duress.
Practical Steps to Prepare Compliant Transfer Pricing Documentation
- Identify all related parties and related persons
- List all material related-party transactions
- Carry out a functional analysis of all major transaction groups
- Select the most appropriate transfer pricing method (CUP, Cost Plus, Resale Price, TNMM or Profit Split)
- Carry out benchmarking studies using credible databases
- Draft intercompany agreements which accurately reflect the substance of the transaction
- Prepare the Disclosure Form, Local File and Master File (if applicable)
- Review and update the files annually, or if there are significant changes
Free zone and Qualifying Free Zone Persons are subject to the same rules. The 0% rate on qualifying income does not automatically mean they are exempt from the arm’s length test in their transactions with related parties.
How Moores Rowland Dubai UAE Can Help You with Transfer Pricing Compliance in Dubai
Preparation of transfer pricing documentation is a technical and time-sensitive process. Mistakes and omissions might result in adjustments, penalties, and extended FTA review.
We at Moores Rowland assist companies and multinational groups in the UAE in the following areas:
- Assessment of applicability of the documentation thresholds
- Preparation of Transfer Pricing Disclosure Forms, Local Files, and Master Files
- Functional analysis and benchmarking studies
- Drafting and review of intercompany agreements
- Responses to FTA information requests
- Coordination of transfer pricing policies with the UAE Corporate Tax and free zones’ requirements
Our team consists of professional tax consultants who have complete knowledge of the local regulations and practical experience in different aspects of corporate, tax, and advisory services.
Do you need assistance with transfer pricing documentation in the UAE?
Get in touch with us at Moores Rowland UAE for a review of your related party transactions and professional assistance with preparing compliant transfer pricing documentation.
Visit our website or book an appointment with our tax and corporate experts.
