Advance Pricing Agreements in UAE are forward-looking arrangements between a Taxable Person and the Federal Tax Authority that determine transfer pricing methodologies, pricing parameters, and critical assumptions for Controlled Transactions, providing tax certainty under the UAE Corporate Tax regime for three to five tax periods. The UAE Corporate Tax Law introduced under Federal Decree-Law No. 47 of 2022 includes Transfer Pricing rules requiring Controlled Transactions to comply with the Arm’s Length Principle. To provide certainty and reduce future disputes, Article 59 allows Taxable Persons to enter into Advance Pricing Agreements (APAs) with the Federal Tax Authority. An APA is a forward-looking agreement that establishes, in advance, the transfer pricing methodology, pricing parameters, and critical assumptions for specified transactions over future tax periods. By agreeing on these elements upfront, APAs help prevent audits and litigation, ensure consistent application of transfer pricing methods, and promote cooperative compliance. Although the process requires detailed analysis and ongoing monitoring, APAs offer long-term predictability and are a key tool for managing transfer pricing risk under the UAE Corporate Tax framework.
Businesses often combine Advance Pricing Agreements with professional transfer pricing advisory services in UAE to ensure robust documentation and defendable pricing models.
Key Features of the UAE APA Programme
The UAE APA programme is a structured and risk-based mechanism designed to provide transfer pricing certainty.
- Eligibility – Any Taxable Person with domestic or cross-border Controlled Transactions may apply for an APA. Eligibility is assessed by the FTA based on the specific facts and circumstances of each case, including the complexity of the Controlled Transactions, the level of Transfer Pricing risk involved, and the overall suitability of the transactions for inclusion within an APA framework. Acceptance into the APA programme remains discretionary.
- Materiality Threshold – Controlled Transactions proposed to be covered under an APA are generally expected to meet an indicative threshold of AED 100 million per Tax Period. This threshold is not absolute and does not, on a standalone basis, determine acceptance or rejection of an application, as the FTA retains discretion to assess overall risk, complexity, and the benefit of entering into an APA.
- Covered Period – An APA must be applied for a minimum of three and a maximum of five prospective Tax Periods. Covering multiple Tax Periods provides medium-term certainty and enables the consistent application of the agreed Transfer Pricing methodology over the duration of the APA.
- Phased Implementation – The APA programme is being introduced in a phased manner to ensure effective administration and stakeholder engagement. At the initial stage, only Unilateral Advance Pricing Agreements are available, with domestic UAPAs applicable from December 2025 and cross-border UAPAs expected to be introduced from 2026, followed by a gradual expansion to bilateral and multilateral APAs.
- Application Process and Fees – The APA process involves a mandatory pre-filing consultation followed by the submission of a formal application within prescribed timelines. A non-refundable fee of AED 30,000 applies to new APA applications, while a reduced fee of AED 15,000 applies to renewals. Compliance with procedural requirements and payment of the applicable fee does not guarantee acceptance, as final approval remains at the discretion of the FTA.
Advance Pricing Agreements form part of a broader UAE Corporate Tax compliance strategy, particularly for businesses engaged in high-value or cross-border Controlled Transactions.
Benefits of entering into an APA
| Tax certainty | An APA fixes the transfer pricing method, pricing criteria, and assumptions for future Tax Periods. The FTA agrees not to challenge the Arm’s Length Price if the APA terms are followed. This provides certainty for 3–5 Tax Periods, allowing stable tax planning. |
| Reduced disputes | Covered Controlled Transactions are not re-examined during audits if APA conditions are met. The APA reduces disputes arising from complex TP methodologies or benchmarking. It lowers the risk of appeals, reassessments, and court proceedings. |
| Collaboration | The APA process involves structured discussions and negotiations with the FTA. Taxpayers can explain business models and TP policies upfront. Issues are resolved through mutual agreement rather than enforcement. |
| Double taxation relief | Bilateral APAs involve both UAE and foreign tax authorities through MAP. They reduce the risk of double taxation on the same transaction. Agreed pricing is accepted by both jurisdictions, increasing certainty. |
| Compliance efficiency | The APA specifies exact documents and data required for compliance. Annual APA Declarations standardize ongoing reporting obligations. This simplifies record-keeping and reduces future information requests. |
2. Types of Advance Pricing Agreements
- Unilateral Advance Pricing Agreements
A Unilateral Advance Pricing Agreement is an agreement entered into between the Federal Tax Authority and a Person and may cover domestic or cross-border Controlled Transactions. A UAPA is binding only on the FTA and the Person from a UAE Corporate Tax perspective and does not bind any foreign tax administration in respect of cross-border transactions. Accordingly, for cross-border Controlled Transactions, the terms of a UAPA apply solely within the UAE jurisdiction. Domestic UAPAs are available from December 2025, while the commencement of cross-border UAPAs is expected in 2026.
- Bilateral and Multilateral APAs
Bilateral Advance Pricing Agreements involve agreements reached between the competent authorities of two jurisdictions through a Mutual Agreement Procedure, while Multilateral Advance Pricing Agreements involve the participation of competent authorities from more than two jurisdictions. These types of APAs are intended to provide relief from double taxation by aligning transfer pricing outcomes across multiple jurisdictions. The Federal Tax Authority plans to introduce BAPAs and MAPAs in later phases of the APA programme.
3. Eligibility and Materiality Threshold
Eligibility criteria
- Any Person with domestic or cross-border Controlled Transactions may apply for an APA.
- The Controlled Transactions must present sufficient complexity or uncertainty to justify an APA.
- Transactions subject to routine application of the Arm’s Length Principle without significant uncertainty may not be suitable.
Materiality threshold
- As a general indicator, the total value of Controlled Transactions proposed to be covered should be at least AED 100 million per Tax Period.
- The threshold is not an absolute requirement and is assessed in conjunction with overall Transfer Pricing risk.
- For Tax Groups, the threshold applies at the group level for transactions with Related Parties outside the Tax Group.
4. APA Application Process
Stage 1 – Pre-filing consultation
• A Person must request a pre-filing consultation with the FTA before submitting a formal APA application.
• The consultation assesses the suitability and scope of the proposed APA.
• It does not bind the FTA or the Person to proceed with an APA.
• The FTA may request additional information during this stage.
Stage 2 – Filing of APA application
• Upon approval to proceed, the Person must submit a formal APA application in the prescribed format.
• The application must include detailed Transfer Pricing documentation, economic analysis, and proposed critical assumptions.
• A non-refundable fee of AED 30,000 is payable at the time of filing.
Stage 3 – Evaluation and negotiation
• The FTA conducts a detailed evaluation of the application.
• This may include information requests, meetings, site visits, and expert analysis.
• The FTA and the Person engage in negotiations to reach agreement on Transfer Pricing criteria.
• If agreement cannot be reached, the application may be closed without conclusion.
Stage 4 – Conclusion and implementation
• Once agreed, the APA is formally signed by both parties.
• The APA becomes binding for the Tax Periods covered, subject to compliance with its terms.
5. Revision, Cancellation, Revocation, and Renewal
An APA may be revised where there are changes in law, business operations, or economic conditions that affect the terms of the agreement. Where a mutually acceptable revision cannot be reached, the APA may be cancelled prospectively from the Tax Period in which the relevant change occurs. The FTA may revoke an APA in cases of material misrepresentation, non-compliance with its terms, or breach of critical assumptions, with revocation applying retrospectively from the first Tax Period covered under the APA. Subject to the absence of material changes in facts or circumstances, a Person may apply for renewal of an APA, in which case a reduced non-refundable fee of AED 15,000 applies
6. Conclusion
The UAE APA framework provides Taxable Persons with a structured mechanism to obtain advance certainty on Transfer Pricing outcomes under the Corporate Tax regime. By agreeing upfront on pricing methodologies, assumptions, and compliance requirements, APAs reduce audit exposure, limit disputes, and support consistent tax treatment over multiple periods. While the programme involves a rigorous application and monitoring process, it offers significant value for businesses with complex or high-value Controlled Transactions, making APAs an effective tool for proactive Transfer Pricing risk management in the UAE.
For any query on APA’s you can reach out to our expert at rakesh@bcl.ae
