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Introduction:
With the introduction of Corporate Tax in the UAE from June 1, 2023, the country has also implemented Transfer Pricing (TP) regulations to prevent profit shifting and ensure tax fairness. Whether you’re a multinational or a local group of companies, related party transactions are now under strict scrutiny.
This blog breaks down everything UAE-based businesses are searching for on Transfer Pricing in 2024 — from arm’s length rules to Master File and Local File documentation, and compliance penalties.
What is Transfer Pricing?
Transfer Pricing refers to the pricing of transactions between related parties or connected persons, including:
The UAE requires these transactions to follow the arm’s length principle — i.e., prices must be set as if the parties were independent and dealing at market terms.
Legal Framework: UAE Transfer Pricing Law
Transfer Pricing in the UAE is governed under:
All Taxable Persons must comply with TP rules, especially those with:
Who Are “Related Parties” and “Connected Persons”?
| Related Party | Definition |
| Parent or subsidiary | >50% ownership or voting rights |
| Individuals with control | Ownership, voting, or decision-making powers |
| Common control across entities | Same shareholder or board control |
| Family relations (up to 4th degree) | Includes siblings, cousins, in-laws |
These relationships trigger TP requirements for pricing and documentation.
What is the Arm’s Length Principle?
All related-party transactions must be priced as if they were between independent parties.
Acceptable Transfer Pricing Methods:
The most appropriate method must be selected based on the nature of transaction and availability of market data.
Transfer Pricing Documentation Requirements (2024)
As per Ministerial Decision No. 97 of 2023, if your UAE business meets certain thresholds, you must maintain two reports:
1. Master File
2. Local File
These files must be maintained annually and submitted to FTA upon request.
Disclosure Form (Mandatory for All)
Every taxable person must submit a Related Party Disclosure Form with the corporate tax return if they have:
Deadline: Alongside annual tax return (within 9 months of year-end)
Penalties for Non-Compliance
FTA may impose penalties for:
Non-compliance can also result in adjusted taxable income, leading to higher tax liability and reputational risk.
Example of TP Application
Let’s say a UAE company lends AED 10 million to its related subsidiary at 0% interest.
The FTA may adjust this transaction by applying a market interest rate (e.g., 5%) and tax the imputed income as part of the lender’s taxable profits.
Summary Table: UAE Transfer Pricing Essentials
| Area | Requirement |
| Arm’s Length Principle | Mandatory for all related party transactions |
| Related Party Disclosure Form | Required with annual tax return |
| Master File | Mandatory if group turnover ≥ AED 3.15B |
| Local File | Mandatory if UAE revenue ≥ AED 200M or TP ≥ AED 10M |
| Acceptable Methods | CUP, Cost Plus, Resale, TNMM, Profit Split |
| Reference Framework | OECD Guidelines |
Final Thoughts
Transfer Pricing in the UAE is no longer optional — even small or mid-sized groups with internal transactions must comply with documentation and fair pricing rules. As enforcement increases, businesses should prepare early to avoid tax disputes and penalties.
Need Help With Transfer Pricing Compliance?
At Think Biz Management Consultancies, we provide:
Book your free consultation today and secure your compliance before your next tax return.
Contact us today for a free consultation.
Contact number: +971 50 983 0334
Email ID: info@alphabets.ae
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