The introduction of the UAE Corporate Tax regime has brought Transfer Pricing (TP) compliance into sharp focus for businesses operating in the UAE. Effective for financial years commencing on or after 1 June 2023, the UAE Corporate Tax Law imposes a 9% tax on taxable income exceeding AED 375,000 and introduces comprehensive Transfer Pricing requirements aligned with internationally recognized OECD standards.
These rules are designed to ensure that transactions between Related Parties and Connected Persons are conducted on an arm’s length basis, preventing the artificial shifting of profits and protecting the UAE tax base.
This article provides a practical overview of the key Transfer Pricing provisions under Federal Decree-Law No. 47 of 2022, the Federal Tax Authority’s Transfer Pricing Guide and related guidance.
1. Arm’s Length Principle (ALP) – Core of UAE TP Rules
Article 34 of the CT Law requires that transactions or arrangements between Related Parties or with Connected Persons be conducted at arm’s length, that is, under conditions that would be agreed between independent parties in comparable circumstances.
- Applies to both domestic and cross-border transactions.
- Payments and benefits to Connected Persons are deductible only if they correspond to market value and are incurred wholly and exclusively for business purposes.
- Exceptions to deductibility limits exist for publicly traded companies, regulated entities and similar cases.
2. Related Parties vs. Connected Persons
UAE rules distinguish these two categories, though both fall under TP scrutiny. Related Parties (Article 35) covers kinship to the fourth degree, 50% or more ownership or control, common ownership, partners in the same unincorporated partnership, a person and its Permanent Establishment, and trust participants. Connected Persons (Article 36) targets owners, directors and officers, and their Related Parties.
3. Controlled Transactions and Comparability Analysis
TP rules cover any commercial or financial transactions between Related Parties or Connected Persons. Accepted methods are CUP, Resale Price, Cost Plus, TNMM and Transactional Profit Split, with others allowed where none can be reliably applied.
4. Documentation and Disclosure Requirements (Article 55 of the CT Law)
Documentation must be provided to the FTA within 30 days upon request. The TP Disclosure Form accompanies the Corporate Tax Return, within 9 months of the tax period end. Related Party Schedule applies above AED 40 million, Connected Person Schedule above AED 500,000. Master and Local Files are required at AED 3.15 billion group revenue or AED 200 million standalone.
5. Compliance, Audits and Risk Management
The burden of proof sits with the taxpayer. The FTA can adjust income, disregard transactions lacking commercial rationale, and levy fines and interest. Unilateral APAs are available for advance certainty. Map relationships, implement TP policies and intercompany agreements, benchmark where relevant, and review annually.
6. Recent Developments and Clarifications
FTA Public Clarification CTP010 on “Director” and “Officer” definitions; Advance Pricing Agreements CTGAPA1, effective 30 December 2025; materiality thresholds for TP disclosures in Corporate Tax Guide CTGTXR1.
How BAM Can Help
BAM builds defensible arm’s-length policies, prepares Master and Local Files, runs benchmarking studies, handles TP disclosures in the tax return, drafts intercompany agreements, supports operational rollout, and monitors compliance on an ongoing basis.
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