Related parties
Parties linked by ownership or control — for example a parent and its subsidiary, companies under common ownership, or individuals and the entities they control. Transactions between them must be priced at arm's length.
Transfer pricing · UAE
Transfer pricing in the UAE, explained clearly
If your business transacts with related parties or connected persons, transfer pricing rules apply. This guide covers the arm's-length principle, who the rules catch, and the documentation thresholds — the Master File, Local File, and TP Disclosure Form.
What is transfer pricing?
Transfer pricing governs how businesses price transactions with parties they are connected to — group companies, common owners, directors, and their related parties. The concern is that prices between such parties could be set to shift profit rather than reflect commercial reality.
UAE Corporate Tax addresses this with the arm's-length principle: transactions between related parties and connected persons must be priced as if they were between independent parties. Where they are not, the FTA can adjust the taxable income accordingly.
This guide is informational. For the wider Corporate Tax framework, see the UAE Corporate Tax guide.
Related parties and connected persons
The two groups the transfer pricing rules apply to.
Connected persons
Owners of the business, directors or officers, and their related parties. Payments to connected persons (such as management fees or salaries above market) must also meet the arm's-length standard to be deductible.
Applying the arm's-length principle
Demonstrating that a transaction is at arm's length follows a recognised sequence:
- Identify the controlled transaction and the parties involved.
- Analyse the functions performed, assets used, and risks assumed by each party.
- Select the most appropriate transfer pricing method for the transaction.
- Benchmark against comparable transactions between independent parties.
- Document the analysis and keep it available for the FTA on request.
The FTA follows internationally recognised transfer pricing methods. The right method depends on the transaction — the goal is always a price an independent party would have accepted.
Documentation thresholds
What you must prepare, and the revenue and transaction thresholds that trigger it.
Master File + Local File
Group revenue ≥ AED 3.15bn OR person revenue ≥ AED 200m
A taxable person must maintain both a Master File and a Local File if EITHER the multinational group's consolidated revenue is AED 3.15 billion or more, OR the taxable person's own revenue is AED 200 million or more in the period.
TP Disclosure Form
Related-party > AED 40m OR connected-person > AED 500k
A Transfer Pricing Disclosure Form is filed with the Corporate Tax return where aggregate related-party transactions exceed AED 40,000,000, or aggregate connected-person transactions exceed AED 500,000. Related-party categories above AED 4,000,000 are itemised.
Thresholds are set by the FTA and Ministry of Finance and may be updated. Confirm current figures before relying on them.
Why it matters for your Corporate Tax
Transfer pricing is not a stand-alone regime — it feeds directly into your Corporate Tax computation. Pricing that is not at arm's length can be adjusted by the FTA, increasing taxable income, and payments to connected persons above market value can be disallowed as deductions.
For Qualifying Free Zone Persons, arm's-length and transfer pricing compliance is also one of the conditions for keeping 0% status on qualifying income — see our Qualifying Free Zone Person guide. When related-party arrangements are material, structured support is worth it: see our transfer pricing services.
How AIMuhaseb helps
Related-party transactions, properly evidenced
AIMuhaseb keeps IFRS-based books that make related-party and connected-person transactions visible and traceable, so you can see when documentation thresholds come into view and support the deductions you claim. Where a Master File, Local File, or Disclosure Form is needed, a specialist works with you to prepare it.
Related-party transactions traced
Threshold monitoring
Disclosure Form support
Aligned with your CT return
FAQ
Transfer pricing questions, answered
What is transfer pricing in the UAE?
Transfer pricing is the set of rules governing how transactions between related parties and connected persons are priced for Corporate Tax. Under the arm's-length principle, those transactions must be priced as if they were between independent parties, so profit is not artificially shifted. The rules apply from the introduction of UAE Corporate Tax.
What is the arm's-length principle?
The arm's-length principle requires that transactions between related parties or connected persons are priced on the same terms that unrelated, independent parties would have agreed. In practice this means analysing the functions, assets, and risks of each party, selecting an appropriate pricing method, and benchmarking against comparable independent transactions.
Who are related parties and connected persons?
Related parties are linked by ownership or control — for example a parent and subsidiary or companies under common ownership. Connected persons are the owners of the business, its directors or officers, and their related parties. Transactions with both must meet the arm's-length standard, and payments to connected persons must be at market value to be deductible.
When do I need a Master File and Local File?
A taxable person must maintain a Master File and a Local File if either the multinational group's consolidated revenue is AED 3.15 billion or more, or the taxable person's own revenue is AED 200 million or more in the relevant period. These documents evidence that intra-group pricing is at arm's length.
When is the Transfer Pricing Disclosure Form required?
The TP Disclosure Form is filed alongside the Corporate Tax return where aggregate related-party transactions exceed AED 40,000,000, or aggregate connected-person transactions exceed AED 500,000. Where a related-party category exceeds AED 4,000,000 it is itemised within the form.
Does transfer pricing apply to smaller UAE businesses?
The arm's-length principle applies to related-party and connected-person transactions generally, but the heavier documentation obligations — the Master File and Local File — only bite at the revenue thresholds above. Even below those thresholds, keeping evidence that intra-group pricing is at arm's length is prudent, since the FTA can request support for the deductions claimed.
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