UAE transfer pricing has become a central focus for businesses since the introduction of corporate tax. The UAE’s transfer pricing framework aligns with global standards, especially the OECD Transfer Pricing Guidelines, to ensure fair taxation and prevent profit shifting among multinational companies. 

What is UAE Transfer Pricing? 

Transfer pricing refers to the pricing of goods, services, and intangible assets exchanged between related parties within a multinational group. In the UAE, these rules apply to both cross-border and domestic transactions involving related parties or connected persons, such as parent companies, subsidiaries, and sister companies. 

Why Are Transfer Pricing Regulations UAE Important? 

The main objective of transfer pricing corporate tax UAE rules is to ensure that transactions between related parties are conducted at arm’s length-meaning, at prices that would apply if the parties were independent and unrelated. This prevents artificial profit shifting to low-tax jurisdictions and protects the UAE’s tax base. 

Key Features of UAE Transfer Pricing Regulations 

• Arm’s Length Principle: All related-party transactions must be priced as if they were between independent entities in similar market conditions. 

• Applicability: The rules cover both cross-border and domestic transactions, including those involving free zone entities and government-related parties. 

• Thresholds: Documentation requirements apply if the total value of related-party transactions exceeds AED 3 million in a tax year. 

Transfer Pricing Documentation Requirements 

Transfer pricing compliance UAE is mandatory for most businesses. The Federal Tax Authority (FTA) requires: 

• Master File: Overview of the multinational group’s operations and transfer pricing policies. 

• Local File: Detailed analysis of the UAE entity’s related-party transactions, demonstrating compliance with the arm’s length principle. 

• Disclosure Forms: Summary of related-party transactions submitted with annual corporate tax returns. 

Entities benefiting from small business relief or those with no related-party transactions must still meet arm’s length standards but may be exempt from full documentation. 

Benchmarking and Analysis 

A key part of UAE corporate tax rules is benchmarking-comparing related-party transaction prices to those between independent parties to ensure they are at market value. The FTA may adjust taxable income if transactions do not meet arm’s length conditions. 

Compliance and Penalties 

Non-compliance with transfer pricing regulations in the UAE can result in penalties, tax adjustments, and increased scrutiny from the FTA. Proper documentation and timely disclosure are essential for risk mitigation and smooth tax audits. 

Practical Steps for UAE Businesses 

• Identify all related-party transactions and ensure they are priced at arm’s length. 

• Maintain robust documentation and perform regular benchmarking analyses. 

• Submit required disclosure forms with corporate tax returns. 

• Stay updated on evolving FTA guidance and thresholds for documentation. 

Conclusion 

With the UAE’s evolving tax landscape, understanding and complying with UAE transfer pricing rules is critical. Businesses must engage an experienced corporate tax consultant in Dubai  to prioritize accurate documentation, arm’s length pricing, and proactive compliance to avoid penalties and ensure smooth operations under the new transfer pricing corporate tax UAE regime. 

FAQs 

What is UAE transfer pricing?

UAE transfer pricing governs pricing of transactions between related parties to ensure they are conducted at arm’s length for fair tax assessment. 

Who must comply with transfer pricing regulations in the UAE?

Businesses with related-party transactions exceeding AED 3 million or multinational groups meeting certain thresholds must comply with transfer pricing documentation and reporting. 

What documentation is required for transfer pricing compliance in the UAE?

Companies must maintain a Master File, Local File, and Country-by-Country Report (CbCR) depending on their size and transaction volume. 

Do transfer pricing rules apply to both domestic and cross-border transactions?

Yes, UAE transfer pricing regulations apply to both domestic and international related-party transactions.