UAE 
Transfer Pricing in UAE — Rules, Documentation & What the FTA Expects
Related party transactions are one of the FTA's top audit priorities. This guide explains the arm's length principle, who must prepare documentation, and how to avoid the most expensive mistakes under UAE CT law.
📋 What's in This Guide
- What is transfer pricing and why UAE introduced it
- Who must comply
- The arm's length principle
- Documentation requirements
- Disclosure form requirements
- Transfer pricing methods
- Penalties for non-compliance
What Is Transfer Pricing?
Transfer pricing refers to the prices charged between related parties (group companies, related companies, associates) for goods, services, intellectual property, and financing. UAE Corporate Tax law requires that all transactions between related parties are conducted at arm's length — meaning at the same price that would apply between independent parties in the open market.
Why it matters: If a UAE company pays excessive management fees to a parent company or charges below-market prices to a related party, the FTA can adjust the taxable income of the UAE entity to reflect arm's length pricing — potentially creating significant additional CT liability.
Who Must Comply with UAE Transfer Pricing Rules?
All UAE taxable persons with related party transactions must apply the arm's length principle. Additionally, specific documentation requirements apply if:
- Total value of all related party transactions exceeds AED 40 million in the tax period, OR
- Any single category of related party transactions (e.g. services, financing, goods) exceeds AED 4 million
If these thresholds are met, you must prepare and maintain a Local File and, in certain cases, a Master File — both prepared in accordance with OECD Guidelines.
Common Related Party Transactions in UAE Businesses
- Management fees paid to a parent company or holding entity
- Loans and interest between group companies
- Shared services (IT, HR, finance) allocated across group members
- Royalties or licence fees paid for use of brand, IP, or technology
- Purchase or sale of goods between UAE entity and overseas group members
- Guarantees provided between group companies
Common mistake: Many UAE SMEs pay "management fees" to a parent or related holding company without any documentation or economic substance behind the service. The FTA can disallow these deductions entirely if they are not arm's length and properly documented.
Ready to get your UAE tax & accounting sorted — properly?
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