Transfer pricing · UAE
Transfer pricing in the UAE: charge your own companies what you would charge a stranger.
The arm's length rule covers every related party deal. We check the prices, complete the disclosures with the return, and prepare the files where required.
The rule
Arm's length, and the five ways to test a price.
Articles 34 to 36 of Federal Decree-Law 47 of 2022 say that any deal between related parties must be priced as if the two sides were unrelated. Management fees, rent, loans, goods sold between group companies, services recharged to an owner's other business: all of it.
The law names five ways to test a price: the comparable uncontrolled price, resale price, cost plus, transactional net margin and transactional profit split methods, and allows another method where none of those fits. The right one depends on what is being sold and what information exists about independent deals like it.
The rule applies whatever the size of the company and whether or not a form is due. What the thresholds below decide is how much has to be written down and filed, not whether the price has to be fair.
What must be filed
One rule for everyone, and four lines that add paperwork.
| Requirement | When it applies | Source |
|---|---|---|
| Arm's length prices | Every transaction with a related party or a connected person, of any size | Articles 34 to 36, Federal Decree-Law 47 of 2022 |
| Related party schedule | Related party transactions in the tax period above AED 40 million in total; each category above AED 4 million is listed | The FTA's corporate tax return guide |
| Connected persons schedule | Payments or benefits to one connected person, with their related parties, above AED 500,000 | The FTA's corporate tax return guide |
| Local file and master file | Revenue of AED 200 million or more in the tax period, or membership of a multinational group with consolidated revenue of AED 3.15 billion or more | Ministerial Decision 97 of 2023 |
The schedules go in with the corporate tax return. For a December year end that is 30 September, the same date as the return and the payment. See Corporate tax.
Benchmarking
What a benchmarking study is, and when you need one.
A benchmarking study finds independent companies doing comparable work and measures the prices or margins they earn. Those results form a range. A related party price inside the range is at arm's length. A price outside it is the one the FTA can move, and the taxable income moves with it.
Not every company needs one. Where a local file is required, the analysis behind each price has to be written down, and a study is usually how that is done. Below the local file line, most owner-managed groups need something shorter: a clear note of each related party deal, the method chosen and why the price is fair, kept on file for when the FTA asks.
What we do
- Map the relationships. Every related party and connected person, and every transaction with each of them in the year.
- Test each price. Choose the method, check the price against the arm's length rule, and tell you plainly where a price needs to change.
- Complete the disclosures. The related party and connected persons schedules, filed with the return as your Tax Agent.
- Put it in writing. Intercompany agreements and a transfer pricing policy that match what the companies actually do.
- Prepare the files. The local file and master file, with the benchmarking behind them, where the thresholds require them.
- Answer the questions. FTA queries on the pricing, handled by the Tax Agent linked to your account.
Questions we are asked
Five straight answers.
- 01
Does transfer pricing apply to a small company?
The arm's length rule does, whatever the size. The forms do not: at AED 40 million or less of related party dealings there is no related party schedule, and below AED 200 million of revenue, outside a large group, there is no local file or master file. You still need to be able to show why each price was fair.
- 02
Who is a connected person?
Someone who owns or controls the company, a director or an officer of it, and the related parties of either. A payment or benefit to them is deductible only at market value and only if it was for the business, and once dealings with one connected person pass AED 500,000 they are disclosed with the return.
- 03
What happens if a price is not at arm's length?
The FTA can adjust it, which changes the taxable income and the tax due, and an understated return can carry penalties. A price you can support with a written analysis is the protection.
- 04
Do we need a master file and a local file?
Only if your revenue in the tax period is AED 200 million or more, or you belong to a multinational group with consolidated revenue of AED 3.15 billion or more. Below those lines the files are not required, but the prices still have to be supportable.
- 05
What does it cost?
A fixed fee, quoted within one business day of seeing the group chart and last year's related party transactions, before any work starts.
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