In brief
UAE Transfer Pricing is now a core Corporate Tax compliance area for tax professionals, FTA Registered Tax Agents, Chartered Tax Advisers, CFOs, auditors and finance teams.
The rules apply to transactions and arrangements between Related Parties and Connected Persons, whether the parties are located in the UAE mainland, a Free Zone or outside the UAE.
The professional challenge is not limited to applying a pricing method. A defensible position requires:
- correct identification of Related Parties and Connected Persons;
- accurate mapping of Controlled Transactions;
- analysis of functions, assets and risks;
- selection of an appropriate transfer pricing method;
- alignment between contracts and actual conduct;
- correct Corporate Tax Return disclosures; and
- contemporaneous supporting documentation.
The disclosure and documentation thresholds do not remove the arm’s length requirement. Transactions below those thresholds must still reflect market conditions.
Key professional takeaways
| Area | Key requirement |
|---|---|
| Scope | Domestic and cross-border Controlled Transactions are covered |
| Arm’s length standard | Commercial and financial terms must reflect independent-party conditions |
| Related Party disclosure | Triggered where aggregate Related Party transactions exceed AED 40 million |
| Category disclosure | Categories exceeding AED 4 million must be reported after the AED 40 million threshold is met |
| Connected Persons | Schedule applies where the relevant aggregate transactions exceed AED 500,000 |
| Master File and Local File | Required where statutory revenue thresholds are met |
| Downward adjustment | Requires successful application to the FTA |
| Documentation | Must support substance, pricing and tax return disclosures |
1. Transfer pricing applies before the reporting thresholds
Article 34 of the UAE Corporate Tax Law requires transactions and arrangements between Related Parties to satisfy the arm’s length standard.
This requirement applies regardless of:
- transaction value;
- whether the parties are both UAE entities;
- whether the transaction is disclosed in the Corporate Tax Return; or
- whether a Master File and Local File are required.
The FTA Transfer Pricing Guide confirms that the rules apply to transactions or arrangements involving Related Parties or Connected Persons.
PTG Insight
Tax professionals should distinguish between three separate tests:
-
Does the arm’s length principle apply?
It applies to Controlled Transactions. -
Must the transaction be disclosed in the Corporate Tax Return?
This depends on the relevant disclosure thresholds. -
Must a Master File and Local File be maintained?
This depends on the statutory documentation thresholds.
Failing to separate these tests is a common compliance error.
2. Related Party and Connected Person identification
A transfer pricing review should begin with a documented relationship analysis.
Related Party status may arise through:
- ownership;
- control;
- family relationships;
- partnership relationships;
- permanent establishment relationships; or
- common ownership or control.
Connected Person rules are particularly relevant to payments or benefits provided to:
- an owner of the Taxable Person;
- a director or officer; or
- a Related Party of an owner, director or officer.
The FTA has also clarified the meaning of “director” and “officer” when applying the Connected Person provisions. See our analysis of the UAE Tax Updates 2026 for further details.
Payments or benefits to Connected Persons are deductible only to the extent that they correspond with the Market Value of the service or benefit received. The Corporate Tax Return Guide confirms this principle and requires adjustments where Market Value is not met.
Professional review point
Job titles alone should not determine the analysis. Tax professionals should review:
- actual authority;
- strategic decision-making powers;
- signing authority;
- contractual responsibilities;
- services performed; and
- economic benefit received by the business.
3. Controlled Transaction mapping
A robust transfer pricing file should reconcile all Controlled Transactions to the general ledger and financial statements.
Common transaction categories include:
| Transaction category | Typical review areas |
|---|---|
| Goods | Pricing policy, gross margin and distribution functions |
| Services | Benefit test, duplication, allocation basis and mark-up |
| Interest | Creditworthiness, currency, maturity, security and repayment terms |
| Guarantees | Economic benefit and arm’s length guarantee fee |
| Intellectual property | Ownership, development functions and royalty basis |
| Assets | Market Value, valuation method and commercial purpose |
| Cost recharges | Pass-through treatment, allocation key and supporting invoices |
| Management remuneration | Role, responsibility, service evidence and Market Value |
Transactions involving foreign subsidiaries and SPVs may also require analysis of tax residence, effective management and control, commercial substance and Participation Exemption. Read our guide on UAE CFC Rules and Foreign SPV Structures.
PTG Insight
The transaction list should not be prepared only from intercompany invoices.
Tax professionals should also review:
- shareholder and director accounts;
- loans without formal agreements;
- guarantees not recorded as fees;
- expenses paid on behalf of group entities;
- asset transfers;
- free-of-charge services;
- management benefits; and
- year-end journal entries.
4. Functional analysis is the foundation
The FTA Transfer Pricing Guide places significant importance on understanding the functions performed, assets used and risks assumed by the parties.
A job title or organisation chart alone is not sufficient. The analysis should explain what personnel actually do and how their activities contribute to value creation.
A professional functional analysis should address:
- procurement;
- sales and marketing;
- pricing authority;
- inventory management;
- customer relationships;
- financing;
- credit risk;
- product or service development;
- strategic management;
- quality control; and
- ownership or use of intellectual property.
PTG Insight
The tested party and pricing method should be selected only after the functional profile is understood.
Starting with a preferred margin and then constructing the functional analysis around it weakens the technical position.
5. Transfer pricing method selection
The UAE framework recognises the principal OECD-aligned methods:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method
- Transactional Profit Split Method
The selected method should be the most appropriate for the Controlled Transaction based on the transaction characteristics, functional analysis and availability of reliable data.
The FTA Guide notes that reliable internal comparables may remove the need to search for external comparables. It also indicates a preference, where possible, for domestic comparables, followed by regional and then wider-market comparables.
Professional review point
A benchmarking study should document:
- tested party selection;
- profit level indicator;
- search geography;
- industry codes;
- screening criteria;
- rejection reasons;
- tested period;
- interquartile range;
- adjustments; and
- conclusion.
A database output without a clearly documented search strategy is not a complete benchmarking analysis.
6. Corporate Tax Return disclosure thresholds
Related Party transactions
The Related Party schedule is required where the aggregate value of all Related Party transactions exceeds AED 40 million during the Tax Period.
Once that threshold is exceeded, a transaction category must be disclosed where the aggregate value of that category with all Related Parties exceeds AED 4 million.
The reportable categories include:
- goods;
- services;
- intellectual property;
- interest;
- assets;
- liabilities; and
- other transactions.
Dividends declared between Related Parties are excluded from the AED 40 million and AED 4 million threshold calculations.
Connected Person transactions
The Connected Persons schedule applies where aggregate transactions with Connected Persons, including their Related Parties, exceed AED 500,000.
The schedule is completed for each Connected Person where the payment or benefit exceeds AED 500,000 for that person together with their Related Parties.
PTG Insight
The disclosure schedule should be reconciled to:
- the trial balance;
- related party notes in the financial statements;
- transfer pricing workings;
- shareholder and director accounts;
- intercompany confirmations; and
- the Corporate Tax computation.
Differences should be explained before submission.
7. Master File and Local File thresholds
A Master File and Local File must be maintained where either:
- the Taxable Person is a Constituent Company of a multinational group with consolidated group revenue of at least AED 3.15 billion; or
- the Taxable Person’s revenue for the relevant Tax Period is at least AED 200 million.
The FTA Transfer Pricing Guide confirms these thresholds.
Master File
The Master File generally provides a group-level overview of:
- business operations;
- value drivers;
- legal and ownership structure;
- intangibles;
- financing arrangements;
- financial and tax positions; and
- global transfer pricing policies.
Local File
The Local File should provide UAE-entity-specific analysis, including:
- business and management structure;
- material Controlled Transactions;
- functional analysis;
- method selection;
- comparability analysis;
- benchmarking;
- financial information; and
- reconciliation to the financial statements.
PTG Insight
Taxpayers below these thresholds should still maintain proportionate evidence supporting arm’s length pricing.
Transfer pricing records should also form part of the taxpayer’s wider document-retention and FTA audit-readiness framework. See our UAE Tax Procedures Update 2026 for the relevant procedural and record-keeping considerations.
“No Local File requirement” does not mean “no transfer pricing documentation requirement.”
8. High-risk areas for UAE tax professionals
Management and technical service fees
The file should demonstrate:
- the service was actually provided;
- the recipient received a commercial benefit;
- the service was not duplicated;
- the activity was not solely a shareholder activity;
- the allocation key was reasonable; and
- the mark-up was supportable.
Intercompany loans
Review:
- borrower credit profile;
- purpose of funding;
- currency;
- duration;
- security;
- repayment terms;
- subordination; and
- comparable market pricing.
Cost allocations
The allocation key should have a reasonable relationship to the expected benefit. For example, headcount may be relevant for human-resource services, while user numbers may be more appropriate for information technology services.
Free Zone arrangements
Transactions involving a Qualifying Free Zone Person require heightened attention where the parties are subject to different Corporate Tax rates.
The pricing, substance and benefit of the transaction should be supportable independently of the tax outcome.
Connected Person remuneration
Owner, director and officer remuneration should be reviewed against:
- responsibilities;
- experience;
- time commitment;
- business size;
- profitability;
- comparable remuneration; and
- actual services performed.
9. Transfer pricing adjustments
An upward adjustment should be reflected where the recorded transaction is not at arm’s length and the adjustment increases Taxable Income.
A downward transfer pricing adjustment that reduces Taxable Income is allowed only following a successful application to the FTA. The Corporate Tax Return Guide expressly confirms this requirement.
Transfer pricing adjustments should form part of the wider year-end Corporate Tax review, including intercompany reconciliations, disclosure testing and audit-readiness procedures. Refer to our UAE Corporate Tax Year-End Checklist.
PTG Insight
Tax professionals should identify potential adjustments before finalising the return.
Year-end adjustments should be supported by:
- contractual authority;
- debit or credit notes;
- accounting entries;
- method calculations;
- tax invoice and VAT analysis where applicable; and
- consistency with the group policy.
10. Advance Pricing Agreements
The FTA has published the Advance Pricing Agreements Guide CTGAPA1, introducing a framework through which eligible taxpayers may seek advance certainty on the arm’s length treatment of qualifying transactions. The official guide was issued on 31 December 2025.
An APA may be relevant for material, recurring or technically complex transactions where significant pricing uncertainty exists.
PTG Insight
An APA should be considered as part of a broader transfer pricing governance strategy.
It does not replace reliable financial information, consistent conduct, intercompany agreements or ongoing compliance monitoring.
Practical checklist for CTAs and tax professionals
Before signing off a Corporate Tax Return, confirm that:
- All Related Parties and Connected Persons have been identified.
- Domestic and cross-border Controlled Transactions are mapped.
- Transaction values reconcile to the ledger and financial statements.
- Contracts agree with actual conduct.
- The functional analysis reflects real functions, assets and risks.
- The selected method is technically supportable.
- Benchmarking is current and properly documented.
- The AED 40 million, AED 4 million and AED 500,000 disclosure tests are complete.
- Master File and Local File thresholds have been tested.
- Any transfer pricing adjustment is correctly treated in the Tax Return.
- Connected Person payments reflect Market Value.
- The file can be produced promptly if requested by the FTA.
Related Party balances, intercompany agreements, Connected Person payments and potential transfer pricing adjustments should be reviewed before the Tax Period closes. Our article on Key UAE Corporate Tax Actions Before Year End provides a wider pre-filing review framework.
How PTG Consultant L.L.C can support
PTG Consultant L.L.C can assist with:
- Transfer Pricing impact assessments
- Related Party and Connected Person mapping
- Controlled Transaction registers
- Functional analysis
- Transfer pricing policy design
- Benchmarking studies
- Master File and Local File preparation
- Corporate Tax Return disclosure schedules
- Intercompany financing reviews
- Connected Person remuneration analysis
- FTA audit-readiness files
- Advance Pricing Agreement advisory
Explore PTG Consultant L.L.C’s Transfer Pricing Advisory services, including benchmarking, Local File, Master File, Related Party reviews and transfer pricing audit support.
Request a Transfer Pricing Review
Official UAE sources
- FTA Transfer Pricing Guide | CTGTP1
- FTA Corporate Tax Returns Guide | CTGTXR1
- Ministerial Decision No. 97 of 2023 on Transfer Pricing Documentation
- FTA Advance Pricing Agreements Guide | CTGAPA1
- FTA Corporate Tax FAQs
- Federal Decree-Law No. 47 of 2022 on Corporate Tax
Frequently Asked Questions
Do UAE Transfer Pricing rules apply to domestic transactions?
Yes. They apply to transactions with Related Parties and Connected Persons in the mainland, Free Zones and foreign jurisdictions.
Does the AED 40 million threshold determine whether transfer pricing applies?
No. It determines whether the Related Party schedule is required. The arm’s length principle applies independently of the disclosure threshold.
Is a Local File mandatory for every UAE company?
No. The statutory thresholds must be tested. However, taxpayers below those thresholds should still retain proportionate arm’s length support.
When is the Connected Persons schedule required?
It applies where the aggregate transactions with Connected Persons, including their Related Parties, exceed AED 500,000, subject to the detailed return requirements.
Can a taxpayer make a downward transfer pricing adjustment?
A downward adjustment that reduces Taxable Income requires successful application to the FTA.
Conclusion
UAE Transfer Pricing compliance requires more than preparing a disclosure schedule or applying a standard mark-up.
For tax professionals and CTAs, the strongest position is built through accurate relationship mapping, robust functional analysis, defensible method selection, reliable benchmarking and complete reconciliation with the Corporate Tax Return.
A contemporaneous, audit-ready transfer pricing file can reduce adjustment risk, support deductions and provide a clear technical basis for positions taken before the FTA.
Disclaimer
This article is prepared for general professional information only.
It should not be treated as legal, tax, audit or assurance advice. Transfer pricing outcomes depend on the specific facts, contractual arrangements, functions, assets, risks, financial information and commercial conduct of each taxpayer.
Professional advice should be obtained before adopting a transfer pricing method, filing a disclosure, making an adjustment or applying for an Advance Pricing Agreement.