The introduction of corporate tax in the UAE has added a new layer of complexity for businesses — and Transfer Pricing UAE is now at the heart of that challenge. For companies operating across borders or managing transactions between related entities, understanding and applying the right transfer pricing framework is no longer optional — it is a legal necessity. Built on OECD principles, Transfer Pricing in the UAE ensures that all related party transactions are priced at arm’s length, preventing tax base erosion and safeguarding the integrity of the UAE’s growing corporate tax system. Whether you are a multinational enterprise or a regional group company, staying compliant with UAE Transfer Pricing regulations is critical to avoiding penalties, passing audits, and maintaining your business reputation in one of the world’s most dynamic financial hubs.
At Jumaira Consultants, we understand that dealing with the complexities of transfer pricing in UAE can be challenging. That’s why we provide a comprehensive suite of services designed to simplify this intricate area and ensure your full compliance with UAE regulations.
Transfer pricing refers to the set of regulations that determine the arm’s length prices for controlled transactions. This encompasses various exchanges, including goods, services, loans, and intangibles. The goal is to ensure that these transactions are conducted fairly and in alignment with market standards, following OECD principles. Transfer Pricing Compliance UAE requirements mandate that related-party transactions are properly documented and priced according to the arm’s length principle. The transfer price should mirror an “open market” or “arm’s length” value to prevent companies from adjusting prices within their corporate group to reduce their overall tax obligations. This method is essential for combating profit shifting and maintaining the integrity of the tax base, especially as Corporate Tax Transfer Pricing UAE regulations continue to evolve in the UAE and other jurisdictions.
Transfer pricing regulations pertain to all transactions between related parties and associated entities, including:
These rules apply to both international and domestic transactions, including those involving entities in free zones.
Transactions between different segments of government entities, whether mandated or non-mandated, fall under these regulations as well.
Businesses designated as exempt or those opting for small business relief must still comply with arm’s length standards for intercompany transactions. However, exempt entities are not obligated to prepare or maintain local and master files.
According to the UAE corporate tax regime, related parties include any individuals or entities associated with a taxable person, as outlined in Article 35(1) of the Corporate Tax Law. Such relationships can stem from kinship, ownership, or control, regardless of whether the parties are residents of the UAE. The criteria for identifying related parties consist of:
The term “related party” also encompasses relationships pertaining to an individual and their permanent establishment, as well as partners within the same unincorporated partnership and trustees or beneficiaries of trusts or foundations. Exemptions apply to non-exempt business activities carried out by the same individual.
Connected persons are defined differently within the UAE corporate tax framework. If a person is identified as a connected person to a taxable entity, all payments or benefits made by the taxable person to the connected individual can only be deducted for corporate tax purposes if they reflect the arm’s length price for the service or benefit provided and are incurred solely for the business of the taxable person. A person is recognized as connected to a taxable entity if they meet any of the following criteria:
A “Controlled Transaction” refers to any transaction or arrangement conducted between related parties or connected persons. Such transactions generally involve the supply or transfer of tangible goods, the provision and reception of services, financial dealings, and the commercial use of intangible assets like patents, brands, and proprietary knowledge. Under the UAE’s transfer pricing regulations, both cross-border controlled transactions (i.e., transactions between a taxable person and its related parties or connected persons situated in different tax jurisdictions) and domestic controlled transactions (i.e., transactions occurring between related parties or connected persons within the UAE, such as those involving free zone entities) must adhere to the arm’s length principle. Arm’s Length Principle in the UAE The Arm’s Length Principle (ALP), defined in Article 34 of the Corporate Tax Law in the UAE, mandates that the pricing for transactions between related parties or connected individuals should reflect the prices that would be expected if those transactions were conducted between independent entities in similar circumstances. This principle ensures fair profit allocation and compliance with transfer pricing regulations, which are critical for both domestic and international transactions. Companies are required to apply one of various internationally accepted methodologies for establishing arm’s length prices, as outlined in the OECD Transfer Pricing Guidelines. If conventional methods are impractical, alternative strategies may be deemed acceptable.
The price established for a specific business transaction in accordance with the Arm’s Length Principle.
Transfer pricing regulations ensure that transactions between related companies are priced fairly, mirroring what independent parties would agree upon. The OECD has identified several methods to establish this “arm’s-length price,” which include:
Transfer Pricing Assessment Conducting a transfer pricing assessment is essential for ensuring adherence to tax regulations. This process involves a careful evaluation of transactions between related entities to confirm they are priced at arm’s length, reflecting terms that independent parties would accept. This not only promotes transparency and reduces tax risks but also allows businesses to proactively tackle potential issues, ensuring alignment with international standards. Transfer Pricing Impact Assessment A transfer pricing impact assessment assists businesses in understanding how new regulations may influence their operations and financial standing. Our comprehensive analysis includes:
Transfer Pricing Disclosure Form The Transfer Pricing Disclosure Form is a requirement for UAE businesses that engage in related-party transactions exceeding certain thresholds. According to Article 55(1) of the Corporate Tax Law, all taxable entities involved in transactions with related or connected parties above a materiality threshold must submit this form alongside their corporate tax return, as mandated for compliance by the Federal Tax Authority (FTA). This form is essential for ensuring adherence to tax regulations and fostering transparency in business operations.
In the UAE, companies with consolidated group revenues exceeding AED 3,150,000,000 or individual revenues above AED 200,000,000 are obligated to prepare detailed documentation to demonstrate compliance with Transfer Pricing UAE regulations. Maintaining accurate records and supporting documentation is essential to meet Transfer Pricing UAE requirements and ensure compliance with applicable tax laws and regulatory standards.
The Local File is vital for maintaining transparency and must be readily available for submission to UAE tax authorities upon their request.
This document provides a comprehensive overview of the entire multinational enterprise (MNE) group’s operations, including:
This report outlines the global distribution of the MNE group’s income, taxes paid, and metrics reflecting the group’s economic activities.
Companies may also need to provide further supporting documentation upon request from the FTA, as indicated in Article 55(4) of the Corporate Tax Law.
This process is vital for helping businesses mitigate tax risks and adhere to transfer pricing regulations.
Benchmarking in transfer pricing services involves comparing a company’s intercompany transactions against similar agreements made between independent entities. This analysis is essential for establishing a “fair market price” for those transactions.
At Jumaira Consultants, we employ cutting-edge software to carry out thorough benchmarking studies. By scrutinizing extensive data on comparable transactions, we can:
This process is vital for helping businesses mitigate tax risks and adhere to transfer pricing regulations.
An Advance Pricing Agreement (APA) is a formal arrangement between a taxpayer and a tax authority that defines how transfer pricing will be applied for future transactions. This agreement outlines the pricing methodology to be used for a specified period, based on agreed-upon conditions.
With the recent introduction of corporate tax, the UAE’s historically tax-friendly environment is changing. Compliance with transfer pricing regulations has become mandatory, making it vital for businesses operating in the region.
Transfer pricing litigation refers to the conflicts that arise between companies and tax authorities over the pricing of intercompany transactions. Disputes typically occur when authorities believe that the pricing does not comply with the arm’s length principle. Resolution may require negotiations, appeals, or legal actions.
All businesses engaged with related parties and connected persons must comply with transfer pricing regulations. This includes transactions between related parties, as well as domestic and cross-border transactions, government transactions, and exempt entities, ensuring accurate pricing for intercompany dealings.
Non-compliance with transfer pricing standards can result in inaccuracies in intercompany transaction pricing, potentially leading to tax disputes and hefty penalties for businesses.
Transfer Pricing Due Diligence (TPDD) is an essential process for multinational enterprises (MNEs) that helps identify and mitigate transfer pricing risks associated with a target company.
