Transfer Pricing by Transaction
Transfer pricing in the UAE is not one rule but a set of them, one per kind of related-party transaction. Find the one that fits yours: services, loans, unpaid balances, IP, restructurings, branches, or the documentation itself.
In short
Every transaction between Related Parties must meet the arm's length standard, but the method for testing it depends on what is being exchanged. Services, loans, unpaid balances, intellectual property, restructurings and branches each have their own approach in the FTA's guide. Start from the transaction you are pricing, then check which documents your size requires.
Most published guidance treats transfer pricing as one subject. For a UAE business it is closer to a dozen, because the FTA's transfer pricing guide prices a management fee, an intercompany loan and a licence of intellectual property in different ways. The arm's length standard is the same for all of them. How you prove it is not.
So the useful first question is not "do transfer pricing rules apply to us?" For almost any group, they do. It is "what exactly are we exchanging with our related parties, and which rule tests that?" This page sorts the guides on this site by that question.
First: which documents does your size require?
Ministerial Decision No. 97 of 2023 requires both a Master File and a Local File where a business is part of a multinational group with consolidated revenue of AED 3,150,000,000 or more, or where its own revenue reaches AED 200,000,000 or more in the Tax Period. Country-by-Country Reporting is a separate regime for UAE-headquartered groups at or above AED 3.15 billion, with a notification due by the last day of the Fiscal Year.
Related guideTransfer Pricing Documentation in the UAE: What You Must KeepThen: what are you exchanging?
Services between group companies
Management, IT, HR or accounting support charged around the group. Low value adding services can use a simplified approach with a 5% mark-up; core business, R&D, sales and marketing, financial services and senior management cannot.
Related guideThe 5% Mark-Up You Can Use, and the Services You Cannot Use It OnMoney: loans and balances left unpaid
A formal intercompany loan is priced off the borrower's credit standing, including implicit group support. An informal one is easier to miss: a trade balance left unsettled beyond the agreed terms can be treated as a loan that should carry interest.
Related guideAn Intercompany Loan Is Priced Off the Borrower, Not the LenderRelated guideThe Loan You Made Without NoticingIntellectual property and shared development
The return from an intangible follows who develops, enhances, maintains, protects and exploits it, not who holds the legal title. Where group members develop an asset together, a cost contribution arrangement can replace the royalty altogether.
Related guideOwning the IP Is Not the Same as Earning From ItRelated guideThe Group Arrangement That Replaces the RoyaltyBenefits of simply being in the group
A benefit that arises only from belonging to the group, with no deliberate group action behind it, needs no payment. A saving the group engineers on purpose, such as a group-wide purchasing discount, does, and has to be divided among the members.
Related guideSome Group Benefits Are Free. Others Have to Be SharedMoving functions, or operating through a branch
Moving a function, contract or team to Dubai is itself a transaction, analysed before and after. A branch is priced as if it were a separate and independent enterprise, under Article 24(4) of the Corporate Tax Law, so it can owe tax on a profit the group as a whole did not make.
Related guideMoving Functions to Dubai Is a TransactionRelated guideA Branch Can Owe Tax on Profits the Group Never MadePayments to owners and directors
Salaries, fees and benefits paid to an owner, a director, or a relative of either are tested differently: under Article 36, the question is how much is deductible, measured against Market Value.
Related guidePaying the Owner Is a Deduction Question, Not a Pricing OneWhen the group policy, or the FTA, gets involved
A group-wide policy set at head office still has to hold up in the UAE context, and the guide expects domestic comparables to be used before regional or global ones. If the FTA concludes a transaction lacks commercial rationality, it can be disregarded and replaced. Where one side is adjusted, Article 34 sets out how the other side is corrected.
Related guideThe Global Policy Still Has to Survive the UAERelated guideWhen the FTA Can Ignore the Transaction EntirelyIf you run a free zone company, transfer pricing carries an extra consequence: the arm's length standard is one of the conditions for the 0% rate itself.
Related guideFor a Free Zone Company, Transfer Pricing Is Not a Penalty Risk16 articles
Transfer Pricing Documentation in the UAE: What You Must Keep
If your business transacts with related parties, UAE Corporate Tax requires those dealings to be at arm's length — and to be documented. This guide explains the arm's length principle, who is caught, and the three layers of transfer pricing documentation: the disclosure form, the Master and Local File, and country-by-country reporting.
Two Thresholds, and One Exception for UAE-Only Groups
Most UAE businesses never reach these thresholds. The ones that do often meet the second, not the first — and a purely UAE group gets a carve-out that is easy to miss.
The Notification Is Due Before the Year Ends
Two deadlines, and the first one falls before the reporting year has even closed. Groups that think of the report as a year-end task have already missed it.
The 5% Mark-Up You Can Use, and the Services You Cannot Use It On
A group service charge has to clear a benefit test before it is priced at all. Once it does, one route lets you skip the benchmarking entirely, and another list tells you when you cannot.
An Intercompany Loan Is Priced Off the Borrower, Not the Lender
Groups usually set an intercompany rate by reference to what the lender pays, or to a round number everyone can live with. The guide builds it from the borrower's creditworthiness instead.
The Loan You Made Without Noticing
Nobody decides to lend money to a group company by leaving an invoice unpaid. The FTA guide treats the result the same way regardless of whether anyone intended it.
Owning the IP Is Not the Same as Earning From It
Groups put the IP in one entity and charge royalties to the others. The guide asks a different question: which entity actually did the work that made the intangible valuable.
The Group Arrangement That Replaces the Royalty
Most groups price shared development as a service charge or a licence. A cost contribution arrangement is a different structure with a different consequence, and it has to be built deliberately.
Some Group Benefits Are Free. Others Have to Be Shared
Belonging to a group is worth money — better prices, cheaper borrowing, shared systems. The line the guide draws is not about the benefit's size. It is about whether anyone did anything to create it.
Moving Functions to Dubai Is a Transaction
Groups that concentrate procurement, sales support or IP in a Dubai entity often treat it as an internal reorganisation. The guide treats it as a set of controlled transactions to be priced.
A Branch Can Owe Tax on Profits the Group Never Made
The separate entity approach is a hypothetical construct, and it produces results that surprise people: profit in the branch when the group has none, and none in the branch when the head office is profitable.
The Global Policy Still Has to Survive the UAE
Head office sends the policy, the UAE entity applies it, and the file is the group's study with a cover page changed. The guide sets out what it expects instead.
There Is No UAE Comparable. Now What?
Every UAE benchmarking study runs into the same wall: there is very little local financial data to search. The guide anticipates that, and sets out the order in which you are expected to widen.
When the FTA Can Ignore the Transaction Entirely
Most transfer pricing risk is about the number. This is the rule that goes further: it can take the transaction away and substitute a different one.
One Side Adjusted. What Happens to the Other?
A transfer pricing adjustment raises income in one company. Whether the other side gets relief depends on which side of a border it sits, and the Corporate Tax Law treats the two very differently.
Paying the Owner Is a Deduction Question, Not a Pricing One
Related Parties and Connected Persons are different sets of people with different consequences. One rule adjusts income in both directions. The other only ever takes a deduction away.
Not sure which of these applies to you?
These guides are general in nature. For a view on your own structure and tax position, schedule a free, no-obligation consultation with our team.