Transfer pricing arrived in the UAE with corporate tax and it catches businesses that have never thought about it. Two groups are most exposed: **free zone companies claiming the 0% rate**, for which arm’s length compliance is a QFZP condition, and **owner-managed businesses** where the owner, their other companies and their family are all connected persons.
Transfer Pricing
Related party transactions under UAE corporate tax
Transfer pricing arrived in the UAE with corporate tax and it catches businesses that have never thought about it. Two groups are most exposed: free zone companies claiming the 0% rate, for which arm’s length compliance is a QFZP condition, and owner-managed businesses where the owner, their other companies and their family are all connected persons.
| Item | Detail |
|---|---|
| Entity | [COMPANY NAME], tax registration [TRN] |
| Jurisdiction | [Mainland / Free zone — name it] |
| Claiming QFZP status? | [Y/N] — if yes, arm’s length compliance is a condition |
| Tax period | [DATE] to [DATE] |
| Revenue for the period | AED [AMOUNT] |
| Related party transactions identified | [NUMBER] |
| Connected person transactions identified | [NUMBER] |
| Total value of related party transactions | AED [AMOUNT] |
| Documentation prepared | [Master file / Local file / Disclosure only] |
| Reviewed by | [NAME] on [DATE] |
1. Who Is a Related Party
| Category | Includes |
|---|---|
| Common ownership or control | Parent, subsidiary, sister companies; entities under common control |
| Individuals related by kinship | Family relationships to the prescribed degree |
| An individual and their company | Where the individual owns or controls it |
| Partners in an unincorporated partnership | |
| A person and their permanent establishment | Head office and branch |
| Connected persons | The owner, a director or officer, and their related parties — a separate and often overlooked category |
1.1The connected person rules are where owner-managed businesses get caught. Payments to the owner, to a director, or to their relatives — salary, rent, management fees, interest — must be at market value and are subject to their own restrictions. Confirm the current definitions and thresholds; they are prescribed and have been refined.
2. What Must Be at Arm’s Length
4 more pages in the Word file
This is page 1 of the Word document, exactly as it appears when you open it. Fields shown like THIS are placeholders for you to complete.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
Transfer pricing under UAE corporate tax applies to domestic related party transactions as well as cross-border ones. An owner-managed business paying rent to the owner’s property company, or a management fee to a sister entity, is within scope even if nothing leaves the country.
Payments to the owner, to a director or officer, and to their relatives are subject to their own arm’s length requirement and restrictions — salary, rent, interest, management fees. Owner-managed businesses map their group companies and forget the individuals entirely.
Transfer pricing compliance is one of the requirements for Qualifying Free Zone Person status. Failing it puts the 0% rate at risk on the same footing as breaching the de minimis. Treat it with the same seriousness.
An intercompany agreement describing services the parent does not actually provide, at a fee nobody analysed, is worse than having none — it creates a document that contradicts the facts. Write the agreement to describe what genuinely happens, then price it.
This is usually the weakest part of a file. Where a management fee is charged, retain evidence of what was actually delivered — correspondence, reports, time records, meeting notes. An adjustment often turns on the absence of proof that anything was received.
A round-sum charge from a parent, or a percentage of revenue set for convenience, with no analysis behind it, is the single most frequently adjusted item. Determine the cost base, the services, and the mark-up separately and document each.
Lending between group entities at no interest, or at a rate set for internal convenience, may require an arm’s length adjustment. Money moved between entities as a matter of treasury convenience still needs a documented basis.
Free use of premises, staff seconded without recharge, guarantees given for nothing, shared systems paid by one entity. These are transactions even where no invoice was raised, and the absence of a charge is itself the issue.
Disclosure with the tax return is required broadly; master file and local file obligations attach at prescribed thresholds. Confirm the current thresholds rather than assuming a small business is outside everything — the disclosure obligation is wider than the documentation one.
A comparables study prepared once and reused for years goes stale as markets and the business change. Review annually, and always after a structural change such as a new entity, a new service or a change in the group.
Recording that the board considered and approved a related party transaction, with the interested party abstaining, strengthens both the tax position and the corporate governance one. It costs one minute entry.
Where the same transaction is documented differently by the UAE entity and its counterparty in another country, both positions weaken. Align the analysis across the group rather than preparing the UAE file in isolation.
Agreements, benchmarking, cost workings, disclosures and evidence of delivery all need retaining for seven years from the end of the relevant tax period. This is a longer horizon than most businesses apply to intercompany paperwork.
A new group entity, a new intercompany service, a change in ownership or a redomiciliation all change the analysis. Tie the review to those events rather than only to the annual cycle.
Reflects UAE tax law current as of {{DATE OF USE}}. Related party and connected person definitions, documentation thresholds, disclosure requirements, permitted pricing methods and QFZP conditions are set by Cabinet and Ministerial Decision and change — confirm the current position with the Federal Tax Authority or a UAE tax adviser, and take advice before relying on any pricing position.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.