Related Party Transactions: Corporate Tax Disclosure Requirements in UAE
Complete Compliance Guide 2025
📑 Table of Contents
Introduction to Related Party Transactions
The UAE Corporate Tax regime, effective from June 1, 2023, introduces comprehensive transfer pricing rules for related party transactions. Businesses must ensure all transactions between related entities meet the arm's length standard as outlined in Federal Decree-Law No. 47 of 2022.
Related party transactions require special attention because they present opportunities for tax avoidance through artificial pricing. The Federal Tax Authority (FTA) has established detailed disclosure requirements, documentation standards, and compliance deadlines aligned with OECD guidelines.
For most calendar-year businesses, the first corporate tax return including transfer pricing disclosures is due September 30, 2025. This guide covers all aspects of compliance to help businesses meet their obligations.
⚠️ Critical 2025 Deadline
All transfer pricing adjustments must be completed BEFORE finalizing FY 2024 audited financial statements. Retrospective adjustments after audit completion are not permitted. Downward adjustments reducing taxable income require prior FTA approval.
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Related Parties & Connected Persons
Related Parties (Article 35)
| Category | Definition |
|---|---|
| Natural Persons | Related up to 4th degree of kinship |
| Individual & Company | ≥50% ownership or control |
| Companies | ≥50% common ownership or control |
| Permanent Establishments | Entity and its PE/branch |
Connected Persons (Article 36)
- Owners of the taxable person
- Directors and officers
- Related parties of owners/directors/officers
- Partners in unincorporated partnerships
Arm's Length Principle
All related party transactions must meet the arm's length standard - pricing as if between independent parties. The UAE recognizes five OECD methods:
| Method | Application |
|---|---|
| Comparable Uncontrolled Price (CUP) | Goods/services with market data |
| Resale Price Method (RPM) | Distribution activities |
| Cost Plus Method (CPM) | Manufacturing/services |
| Transactional Net Margin (TNMM) | Complex transactions |
| Profit Split Method (PSM) | Highly integrated operations |
Disclosure Thresholds
Related Party Transactions
- Primary: Aggregate value > AED 40 million
- Secondary: Per category > AED 4 million
- Categories: Goods, Services, IP, Interest, Assets, Liabilities, Others
Connected Persons
- Threshold: Aggregate payments > AED 500,000
- Individual disclosure: Per person > AED 500,000
Transfer Pricing Disclosure Form
Required information for each transaction category exceeding AED 4M:
| Field | Requirement |
|---|---|
| Related Party Name | Full legal name |
| Transaction Type | Category classification |
| Tax Residence | Country/jurisdiction |
| Gross Value | Amount recorded in statements |
| TP Method | Method applied |
| Arm's Length Value | Market value determined |
| Tax Adjustment | Difference (upward/downward) |
Downward Adjustments: Any adjustments decreasing taxable income MUST be approved by FTA PRIOR to submission. This is mandatory and non-negotiable.
Learn more about accounting requirements for trading companies.
Transfer Pricing Documentation
| Document | Threshold | Deadline |
|---|---|---|
| Master File | Group revenue ≥ AED 3.15B OR entity ≥ AED 200M | 30 days from FTA request |
| Local File | Group revenue ≥ AED 3.15B OR entity ≥ AED 200M | 30 days from FTA request |
| CbC Report | Group revenue ≥ AED 3.15B | 12 months after year-end |
| TP Policy | All with RP transactions | Contemporaneous (within 3 years) |
| Benchmarking | All with RP transactions | Before audit finalization |
For budget planning assistance, see creating effective business budgets.
Compliance Deadlines 2025
For Calendar Year 2024 (Tax Period: Jan 1 - Dec 31, 2024):
| Milestone | Deadline |
|---|---|
| TP Documentation Complete | Before audit finalization (Q1 2025) |
| Audited Statements Finalized | Before Sept 30, 2025 |
| Corporate Tax Return Filed | September 30, 2025 |
| TP Disclosure Form Submitted | September 30, 2025 |
| Tax Payment Due | September 30, 2025 |
| CbC Report (large MNEs) | December 31, 2025 |
Related: Trading license requirements in UAE.
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Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Late Tax Return Filing | AED 1,000 - 10,000 |
| Late Tax Payment | Daily penalty + interest |
| Failure to Maintain Records | AED 10,000 - 50,000 |
| Providing False Information | Up to AED 20,000 + tax due |
| Late TP Documentation | AED 10,000+ |
| Non-Arm's Length Pricing | Tax adjustment + penalties |
Understand financial metrics with important financial ratios and ROI calculation.
Best Practices for Compliance
- Identify all related parties and connected persons early
- Implement robust TP policies and update regularly
- Conduct benchmarking studies before year-end
- Maintain contemporaneous documentation
- Integrate TP adjustments into audited accounts
- Seek FTA approval for downward adjustments proactively
- Establish formal compensation policies for connected persons
- Conduct annual compliance reviews
- Engage qualified tax advisors for complex transactions
- Keep documentation organized and audit-ready
Also see: Free zone corporate tax implications and payroll service costs.
Frequently Asked Questions
Conclusion
Related party transaction compliance under UAE Corporate Tax Law requires careful planning, comprehensive documentation, and timely execution. With the September 30, 2025 deadline approaching for most calendar-year taxpayers, businesses must act now to ensure full compliance.
Key success factors include: early identification of all related parties and connected persons, contemporaneous preparation of transfer pricing documentation, completion of benchmarking studies before audit finalization, proper integration of TP adjustments into financial statements, and timely submission of disclosure forms.
At One Desk Solution, we specialize in transfer pricing compliance, documentation preparation, and corporate tax advisory services. Our experienced team can guide you through every aspect of related party transaction compliance, from identifying relationships to preparing disclosure forms and maintaining audit-ready documentation.
Our Transfer Pricing Services Include:
- Related party identification and relationship mapping
- Transfer pricing policy development and documentation
- Benchmarking studies using recognized OECD methods
- Master File and Local File preparation
- Transfer Pricing Disclosure Form completion
- Connected Persons Schedule preparation
- Country-by-Country Reporting support
- FTA representation and audit defense
Don't risk non-compliance penalties or last-minute scrambling. Contact us today to ensure your related party transactions meet all UAE Corporate Tax requirements.
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