Filing your corporate tax return is not the end of your UAE compliance journey. If your business trades with a parent company, a sister entity, a shareholder or another connected party, the Federal Tax Authority (FTA) expects you to prove that the prices were fair. Strong transfer pricing documentation in the UAE is how you do that.
This guide explains what the FTA expects, which thresholds trigger each obligation, and how to avoid costly adjustments.
What Does the Arm’s Length Principle Mean in the UAE?
The arm’s length principle requires related parties to price their dealings as independent businesses would in comparable circumstances. It sits in Articles 34 to 36 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. The UAE follows the OECD Transfer Pricing Guidelines as its main interpretive framework.
In practical terms, the FTA can adjust your taxable income if a related-party transaction was not priced at arm’s length. It can also challenge payments to connected persons that exceed market value. A price that suits your group is not enough. You must be able to show that it matches the market.
Why the FTA Wants Proof, Not Assurances
Since the introduction of UAE corporate tax, intra-group pricing directly affects taxable income. The FTA no longer treats it as a background issue. The UAE framework now has four layers:
- the substantive duty to price related-party transactions at arm’s length
- disclosure of related party and connected person transactions with the tax return
- a Master File and Local File for taxpayers meeting the thresholds
- country-by-country reporting for large multinational groups
A UAE business may therefore hold a tax return that looks correct and still fail a pricing review because the evidence behind the numbers is thin.
Who Must Comply? Key Thresholds for Related Party Transactions in the UAE
Obligations stack by size and profile. Confirm your position against the latest FTA guidance before you file.
Transfer pricing disclosure form: required with the corporate tax return where related party transactions in the tax period exceed AED 40 million. Transaction categories above AED 4 million are detailed individually. Transactions with connected persons carry their own disclosure rules.
Master File and Local File: required if your own revenue is AED 200 million or more, or if you belong to a multinational group with consolidated global revenue of AED 3.15 billion or more (Ministerial Decision No. 97 of 2023).
Country-by-country reporting: applies to the ultimate parent entity of an in-scope multinational group.
Falling below the Local File threshold does not remove the arm’s length duty. A UAE company with AED 30 million in revenue that buys management services from its parent may have no Local File obligation. It must still justify the price if the FTA asks.
What the FTA Expects to See
When the FTA requests documentation, you have 30 days to produce your Master File and Local File. Records must be kept for seven years. A defensible file typically includes:
- a clear description of the related party transactions and the parties involved
- a functional analysis covering functions performed, assets used and risks assumed
- the transfer pricing method selected and the reasons for choosing it
- a benchmarking study using comparable independent companies
- the written agreements and invoices that match the pricing policy
The accepted methods follow the OECD: Comparable Uncontrolled Price, Resale Price, Cost Plus, Transactional Net Margin Method and Profit Split.
Common Gaps That Invite FTA Challenges
These are the weaknesses we see most often in related party deals:
- intra-group agreements missing, outdated or inconsistent with what actually happens
- management fees and royalties charged without a benefit analysis
- interest on shareholder loans set without a market rate benchmark
- margins that swing between years with no explanation
- benchmarking built on weak or non-comparable data
- related party and connected person schedules in the return that do not match the accounts
How to Prepare: A Practical Checklist
- Map every related party and connected person transaction in the tax period.
- Check which thresholds apply to your business.
- Put written intra-group agreements in place and align them with actual practice.
- Document a transfer pricing policy for each transaction category.
- Commission a benchmarking study before year end, not after.
- Reconcile the disclosure form with your financial statements.
- Consider an advance pricing agreement for high-value or recurring structures. The FTA’s APA guidance was issued in December 2025.
Frequently Asked Questions
Is transfer pricing documentation mandatory in the UAE?
Yes, where the thresholds are met. All related party transactions must still be at arm’s length, and you must be able to justify them on request.
Do small businesses need to worry about transfer pricing?
Yes. Falling below the Master File and Local File thresholds removes only the documentation obligation. The arm’s length principle still applies.
What is the difference between a Master File and a Local File?
The Master File gives a high-level overview of the multinational group’s global operations. The Local File contains UAE-specific detail on your related party transactions, including the functional and comparability analysis.
How Tax Gian Can Help
Tax Gian supports UAE businesses with transfer pricing services from policy design to FTA defence:
- transfer pricing disclosure form preparation
- Local File and Master File preparation
- functional analysis and benchmarking studies
- intra-group agreement and policy drafting
- support during FTA queries and audits
If your group deals with related parties, speak to our transfer pricing specialist before your next filing deadline.
