Transfer pricing regulations in the UAE are the rules that govern how companies price transactions between related parties and connected persons for Corporate Tax purposes. They are set out in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the UAE Corporate Tax Law), which took effect for financial years beginning on or after 1 June 2023, and they are administered by the Federal Tax Authority (FTA). At their core, these regulations require that every controlled transaction reflect the arm’s length principle, meaning the price must match what independent parties would agree to in comparable circumstances.
The UAE framework is closely aligned with the OECD Transfer Pricing Guidelines. In October 2023 the FTA issued a dedicated Transfer Pricing Guide (reference CTGTP1) that explains how the rules apply in practice and confirms that the OECD Guidelines serve as the interpretive standard where the law is silent. Below is a plain-language breakdown of what the regulations cover, who they apply to, and what businesses must do to stay compliant.
The legal foundation
Before Corporate Tax arrived, the UAE was widely seen as a near-zero-tax jurisdiction. That changed with Federal Decree-Law No. 47 of 2022, which introduced a standard Corporate Tax rate of 9 percent on taxable income above AED 375,000, along with a formal transfer pricing regime. The transfer pricing provisions sit mainly in Articles 34 to 36 and Article 55 of the law, supported by secondary legislation and FTA guidance.
- Article 34- Establishes the arm’s length principle and the accepted pricing methods.
- Article 35- Defines Related Parties and the concept of control.
- Article 36- Addresses payments and benefits provided to Connected Persons.
- Article 55- Sets out the transfer pricing documentation obligations.
- Ministerial Decision No. 97 of 2023- Prescribes the Master File and Local File requirements and thresholds.
- Cabinet Decision No. 75 of 2023- Provides the administrative penalties that apply to non-compliance.
The arm’s length principle: the heart of the rules
The arm’s length principle is the single most important concept in UAE transfer pricing. Under Article 34, transactions between related parties and connected persons must be priced as if they were carried out between independent parties acting in comparable conditions. The principle applies to every kind of controlled dealing, including the sale of goods, the provision of services, intra-group financing, royalties on intellectual property, and management fees.
A key point that many businesses miss is that the arm’s length principle carries no size threshold. It binds every taxable person with related-party transactions, regardless of revenue. Documentation thresholds determine when you must formally prepare and file certain records, but they do not switch off the underlying obligation to price transactions fairly. Even a small business that falls below every documentation trigger must still be able to justify its intercompany pricing if the FTA asks.
Who counts as a related party or connected person?
Understanding the scope of the rules starts with two definitions. Getting these wrong is one of the most common sources of exposure, because the UAE definitions differ from the related-party definitions used in accounting standards such as IAS 24.
Related Parties (Article 35)
Related parties are generally linked through 50 percent or more direct or indirect ownership, or through control by other means such as board representation or the ability to direct decisions. This captures a UAE subsidiary and its foreign parent, two sister companies under common ownership, and individuals connected by close kinship, among others.
Connected Persons (Article 36)
Connected persons include owners of the business, directors, officers, and their related parties. The concern here is that payments or benefits given to these persons, for example management fees or salaries, must be commercially justified and must not exceed the market value of the service actually provided. If they do, the FTA can disallow the excess as a deduction.
The five transfer pricing methods
Article 34(3) of the Corporate Tax Law adopts the same five methods recognised by the OECD. There is no rigid hierarchy between them. Instead, a business must apply the most appropriate method, chosen by reference to the functions performed, assets used, and risks borne by each party to the transaction.
- 1. Comparable Uncontrolled Price (CUP): compares the price of a controlled transaction directly with the price of a comparable transaction between independent parties. It is the most direct method and works best for commodities, standardised products, and financing benchmarked to market interest rates.
- 2. Resale Price Method (RPM): starts from the price at which a product is resold to an independent customer and works backwards by deducting an appropriate gross margin. It suits distributors that add limited value.
- 3. Cost Plus Method (CPM): adds an arm’s length mark-up to the costs incurred by a supplier. It is common for manufacturers and service providers.
- 4. Transactional Net Margin Method (TNMM): compares the net profit margin earned on a controlled transaction against margins earned by comparable independent companies. This is the most widely applied method in UAE practice, largely because reliable net-margin comparables are easier to find than direct price data.
- 5. Profit Split Method (PSM): allocates the combined profit from a transaction based on each party’s relative contribution. It is best suited to highly integrated operations and cases where both parties own unique, valuable intangibles.
Article 34(4) also permits a taxpayer to use an alternative method where none of the five can be reasonably applied, provided the result still satisfies the arm’s length principle and is properly documented.
Documentation requirements and thresholds
The UAE operates a layered documentation system. The obligations sit at different levels, and it is entirely possible to fall inside one while sitting outside another. The main components are the Disclosure Form, the Local File, the Master File, and, for the largest groups, Country-by-Country Reporting.
Transfer Pricing Disclosure Form
This form is filed together with the annual Corporate Tax return. It requires businesses to disclose related-party transactions once they cross materiality thresholds. In broad terms, disclosure is triggered where aggregate related-party transactions reach AED 40 million, with individual transaction categories such as goods, services, financing, or intellectual property requiring disclosure once they exceed AED 4 million. Payments and benefits to a connected person are disclosed once they exceed AED 500,000 in aggregate.
Local File and Master File
Under Article 55 read with Ministerial Decision No. 97 of 2023, a taxable person must maintain a Master File and a Local File if it meets either of two tests during the relevant tax period:
- the taxable person has revenue of AED 200 million or more, or
- the taxable person is part of a multinational enterprise group with consolidated global revenue of AED 3.15 billion or more.
The Local File is an entity-specific document. It sets out the functions, assets, and risks of the UAE entity, the transfer pricing method chosen for each controlled transaction, and the benchmarking that supports the arm’s length price. The Master File is a group-level document that gives the FTA a high-level view of the multinational group’s global operations, value chain, intangibles strategy, and financing structure.
A useful practical exception applies to purely domestic groups. Where a UAE entity meets only the AED 200 million standalone threshold and every entity in its ownership structure is UAE-resident, it must prepare a Local File but is not required to prepare a Master File. The Master File obligation is triggered only where the entity belongs to a multinational group operating across more than one jurisdiction.
Both files must be maintained contemporaneously and submitted to the FTA within 30 days of a written request. That deadline starts the day the request is issued, so documentation cannot be left until an audit begins.
Country-by-Country Reporting
Country-by-Country Reporting applies to very large multinational groups with consolidated global revenue of AED 3.15 billion or more, typically where the ultimate parent is UAE-resident. The report provides a jurisdiction-by-jurisdiction breakdown of revenue, profit, taxes paid, employees, and tangible assets, and it must generally be filed within 12 months of the end of the reporting fiscal year.
Filing deadlines
The Corporate Tax return, which includes the transfer pricing disclosure, must be filed with the FTA no later than nine months after the end of the relevant tax period. For a business with a 31 December year end, this means the return for the 2024 financial year is due by 30 September 2025. Aligning transfer pricing documentation with this timeline is important, because the disclosure figures and the supporting files need to tell a consistent story.
Free zones and Qualifying Free Zone Persons
A frequent misconception is that free zone companies are outside the transfer pricing net. They are not. Free zone entities, including those benefiting from the 0 percent rate as a Qualifying Free Zone Person, must comply fully with the arm’s length principle and the associated documentation rules. In fact, transfer pricing plays a direct role in determining whether a free zone entity’s income qualifies for the preferential rate, so accurate pricing and documentation are especially important in this segment.
Businesses that have elected for Small Business Relief are relieved of the formal transfer pricing documentation requirements while the relief applies, but they still cannot ignore the arm’s length principle itself.
Penalties for non-compliance
Non-compliance carries real financial consequences. Under Cabinet Decision No. 75 of 2023, failing to maintain the required records can attract administrative penalties. Beyond fixed penalties, inaccurate or unsupported pricing can lead the FTA to make transfer pricing adjustments, which increase taxable income and result in additional tax and interest. Weak documentation also tends to invite deeper scrutiny across future tax periods, which is why experienced advisers focus on documentation readiness rather than reactive fixes after a query lands.
A recent development: The Advance Pricing Agreement programme
In December 2025 the FTA introduced an Advance Pricing Agreement (APA) programme under the Corporate Tax regime. An APA is a voluntary mechanism that lets a taxpayer agree the arm’s length pricing of specified transactions with the FTA in advance, giving upfront certainty and reducing the risk of future disputes. The rollout is phased, beginning with Unilateral APAs. For groups with complex or high-value intercompany arrangements, the programme is a significant addition to the UAE’s maturing transfer pricing landscape.
How BCL Globiz helps UAE businesses stay compliant
Transfer pricing in the UAE is now a core compliance area rather than a niche international tax concept, and the practical work of identifying related parties, selecting the right method, and building defensible benchmarking studies calls for specialist support. BCL Globiz is a leading accounting and tax consulting firm in the UAE, with a team of more than 300 professionals, including Chartered Accountants and CPAs, serving clients across the region and beyond.
BCL Globiz applies OECD-compliant methodologies and industry-leading databases to establish defensible transfer pricing positions. Its transfer pricing services include:
- assessing your current transfer pricing policy and identifying compliance gaps and risks.
- conducting detailed FAR (Functions, Assets, and Risks) analysis and economic analysis to support pricing.
- preparing the TP Disclosure Form, Local File, Master File, and Country-by-Country data as applicable.
- running benchmarking studies using regional comparables across the GCC, Europe, or Asia to support method selection.
- designing tax-efficient, arm’s length intercompany arrangements and drafting the agreements that back them.
As Rakesh Jain, Partner and a recognised transfer pricing expert at BCL, has noted, transfer pricing rules are often misunderstood: many businesses assume they apply only to cross-border groups, when in practice most UAE companies deal with connected persons every day. To explore how these rules apply to your business, learn more about BCL Globiz Transfer Pricing Services.
Key takeaways
- Transfer pricing regulations in the UAE are governed by Federal Decree-Law No. 47 of 2022 and administered by the FTA, effective for financial years from 1 June 2023.
- The arm’s length principle applies to all related-party and connected-person transactions, with no size threshold.
- The UAE recognises the five OECD methods, with the Transactional Net Margin Method the most widely used in practice.
- A Local File and Master File are required at AED 200 million entity revenue or AED 3.15 billion group revenue, while the Disclosure Form is triggered at AED 40 million of related-party transactions.
- Free zone and Qualifying Free Zone Persons must comply, and penalties apply under Cabinet Decision No. 75 of 2023.
