Transfer Pricing Rules
Written in plain language for general understanding. This is educational content, not legal advice. Based on UAE federal decrees, laws, and ministerial decisions.
UAE Federal Law
What is this right?
Transfer pricing rules ensure that transactions between related companies are priced fairly:
- Arm's length principle: Transactions between related parties (parent-subsidiary, companies under the same owner) must be priced as if they were between independent parties.
- Documentation: Companies must maintain transfer pricing documentation that explains how prices were set for related-party transactions.
- Disclosure: You must disclose related-party transactions in your corporate tax return.
- Revenue threshold: Businesses with revenue over AED 200 million must prepare a Master File and Local File. All businesses must maintain adequate documentation.
- Accepted methods: The FTA accepts standard OECD transfer pricing methods, including comparable uncontrolled price, resale minus, cost plus, and transactional net margin methods.
When does it apply?
- Your business has transactions with related parties (parent, subsidiary, affiliate, or connected persons).
- You operate a multinational group with entities in the UAE and other countries.
- Your free zone company transacts with a mainland group company.
What should you do?
- Identify all related-party transactions — intercompany sales, services, loans, royalties, and management fees.
- Prepare transfer pricing documentation before filing your corporate tax return.
- Benchmark your prices against comparable independent transactions using accepted methods.
- Consult a transfer pricing specialist if your group has significant intercompany dealings.
What should you NOT do?
- Do not use artificial pricing to shift profits out of the UAE — the FTA can adjust your taxable income.
- Do not wait until an audit to prepare your transfer pricing documentation — it should be ready at the time of filing.
- Do not ignore related-party disclosure requirements — penalties apply for non-disclosure.
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