Transfer Pricing Documentation UAE: 2025 Guide for Businesses

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The introduction of Corporate Tax has permanently reshaped the UAE’s business and financial landscape. For decades a zero-tax haven, the nation is now aligning with global standards of fiscal transparency and fairness. At the heart of this transformation lies a critical compliance requirement that every multinational and qualifying local business must master: Transfer Pricing (TP). This isn’t just another piece of administrative paperwork; it’s a fundamental pillar of the new tax regime.

This article serves as your definitive 2025 guide to Transfer Pricing Documentation UAE. We will demystify the regulations, outline your specific obligations, and provide a clear, actionable roadmap to ensure your business remains compliant, avoids costly penalties, and operates with confidence in this new era of UAE taxation.

What is Transfer Pricing and Why It’s a Priority in the UAE

At its core, Transfer Pricing refers to the rules and methods for pricing transactions between related entities within a corporate group. These intercompany transactions can include the sale of goods, provision of services, licensing of intellectual property, or providing loans.

The guiding principle behind all TP regulations is the “arm’s length principle.” In simple terms, this principle mandates that the price for a transaction between related parties should be the same as if the transaction had occurred between two completely independent, unrelated parties in the open market.

Why the sudden focus in the UAE?

The enforcement of Transfer Pricing rules is a direct consequence of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022). The primary objective is to prevent profit shifting—the practice where multinational enterprises (MNEs) manipulate intercompany prices to move profits from high-tax jurisdictions to low- or no-tax jurisdictions, thereby eroding the tax base.

By implementing a robust TP regime based on the OECD Transfer Pricing Guidelines, the UAE is demonstrating its commitment to international tax standards and its role as a responsible global business hub. This move enhances the country’s reputation and aligns its economic framework with global best practices, as championed by institutions like the UAE Ministry of Economy.

For your business, ignoring these regulations is not an option. The risks of non-compliance are severe and include:

  • Tax Adjustments: The Federal Tax Authority (FTA) can re-calculate your taxable income if they determine your related-party transactions were not at arm’s length, leading to a higher tax bill.
  • Tax Audits: Non-compliance is a major red flag that can trigger a comprehensive audit of your company’s financial affairs.
  • Significant Financial Penalties: The law prescribes hefty penalties for failing to maintain or submit the required documentation.

Who Needs to Comply? Determining Your TP Obligations

The UAE’s Transfer Pricing rules apply to any business subject to Corporate Tax that engages in transactions with “Related Parties” or “Connected Persons.” Understanding these definitions is the first step in assessing your obligations.

According to Article 35 of the Corporate Tax Law, Related Parties include:

  • Two or more individuals related within the fourth degree of kinship (e.g., great-grandparents, first cousins).
  • An individual and a legal entity where the individual (alone or with other related parties) owns 50% or more of the entity.
  • Two or more legal entities where one person (alone or with related parties) owns 50% or more of each entity.
  • A taxable person and its permanent establishment in another country.

A Connected Person is broadly defined and includes the owner of the business, a director or officer, or any of their related parties.

Essentially, if your UAE business conducts any transactions—be it for services, goods, financing, or royalties—with a parent company, a subsidiary, a sister company, or even a key owner or director, you fall under the scope of the TP regulations.

Documentation Thresholds

While the arm’s length principle applies to all businesses with related party transactions, the mandatory requirement to prepare and maintain specific Transfer Pricing Documentation UAE depends on certain thresholds:

  • Businesses part of an MNE Group with consolidated revenues of AED 3.15 billion or more: These groups are subject to the full three-tiered documentation requirements, including the Country-by-Country Report (CbCR).
  • Businesses with revenues of AED 200 million or more in a relevant tax period: These businesses must prepare and maintain both a Master File and a Local File.
  • All other businesses with related party transactions: Even if you fall below these revenue thresholds, you are still required to:
    • Ensure all your related party transactions adhere to the arm’s length principle.
    • Submit a Disclosure Form with your annual Corporate Tax return.
    • Be prepared to substantiate the arm’s length nature of your transactions if requested by the FTA.

It is a common misconception that small businesses are exempt. While the documentation burden is lighter, the compliance principle is universal.

The Three-Tiered Approach to Transfer Pricing Documentation UAE

For businesses meeting the specified thresholds, the UAE has adopted the OECD’s recommended three-tiered documentation structure. This approach ensures that tax authorities have a comprehensive yet clear view of an MNE’s global operations and its specific activities within the UAE.

1. The Master File

Purpose: The Master File provides a high-level “blueprint” of the entire MNE group. It gives the FTA a bird’s-eye view of the group’s global business operations, its overall transfer pricing policies, and its allocation of income and economic activity. It is not specific to the UAE but covers the group as a whole.

Key Contents of the Master File:

  • Organizational Structure: A chart illustrating the MNE’s legal and ownership structure and the geographical location of its operating entities.
  • Description of Business: A general description of the group’s business, including important drivers of business profit, a description of the supply chain for the group’s five largest products/services, and a description of important service arrangements between members.
  • Intangibles: A comprehensive overview of the group’s important intangibles (e.g., patents, trademarks, trade secrets), including the location of principal R&D facilities and the group’s general TP policy for these intangibles.
  • Intercompany Financial Activities: A general description of how the group is financed, including details of important financing arrangements with unrelated lenders and identification of any central financing functions within the group.
  • Financial and Tax Positions: The MNE’s consolidated financial statements for the year and a list of any advance pricing agreements (APAs) or tax rulings related to the allocation of income.

2. The Local File

Purpose: This is the most critical and detailed piece of Transfer Pricing Documentation UAE for your local entity. While the Master File is about the group, the Local File focuses specifically on the UAE-based company. Its purpose is to prove, with detailed evidence and analysis, that all local related-party transactions were conducted at arm’s length.

Key Contents of the Local File:

  • Local Entity Information: A detailed management structure of the local entity, an organization chart, and a description of the individuals to whom local management reports.
  • Business Strategy: A detailed description of the local entity’s business strategy, including its role in the wider group and any business restructurings or transfers of intangibles it has been involved in.
  • Related-Party Transactions: A granular breakdown of each material category of related-party transaction. This includes:
    • The amount of payments and receipts for each category of transaction.
    • The identification of the associated related parties involved.
    • Copies of all material intercompany agreements.
  • Functional Analysis: A detailed analysis of the functions performed, assets used, and risks assumed (the “FAR analysis”) by the UAE entity and the other related parties in the transaction.
  • Comparability Analysis & Benchmarking: This is the core of the Local File. It involves:
    • Selection of the TP Method: Justification for selecting the most appropriate transfer pricing method (e.g., Comparable Uncontrolled Price, Resale Price, Cost Plus, etc.).
    • Benchmarking Study: Identification of comparable independent transactions or companies.
    • Conclusion: A detailed explanation demonstrating how the pricing of your transactions is consistent with the arm’s length principle based on the analysis.
  • Financial Information: Audited financial statements of the local entity and a reconciliation showing how the financial data used in the TP analysis ties back to the financial statements.

3. Country-by-Country Report (CbCR)

Purpose: The CbCR is a high-level reporting tool applicable only to the largest MNEs—those with a total consolidated group revenue of AED 3.15 billion or more in the preceding financial year. It provides a standardized annual overview of key financial metrics for each jurisdiction where the MNE operates. This helps tax authorities assess high-level transfer pricing risks and other base erosion and profit shifting (BEPS) risks.

Key Contents of the CbCR:

The report requires aggregate data for each tax jurisdiction, including:

  • Total revenues (broken down into related-party and unrelated-party revenue).
  • Profit or loss before income tax.
  • Income tax paid and accrued.
  • Stated capital and accumulated earnings.
  • Number of employees.
  • Tangible assets (other than cash and cash equivalents).

Key Deadlines and Penalties You Cannot Ignore

Meeting deadlines is non-negotiable. The FTA has established a clear timeline for TP compliance, and failure to adhere to it will result in automatic penalties