What is Transfer Pricing Documentation in UAE?
Transfer pricing documentation in the UAE refers to mandatory records proving that transactions between related parties—like subsidiaries or affiliates—are priced at arm's length, as if between unrelated entities, to comply with the 9% corporate tax regime. Introduced via Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023, these rules align with OECD standards and apply to tax periods from June 1, 2023, ensuring fair taxation and preventing profit shifting.
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Table of Contents
- UAE Corporate Tax & Arm's Length Principle
- Who Needs TP Documentation?
- Three-Tier Documentation Structure
- Accepted Transfer Pricing Methods
- Preparing and Maintaining Documentation
- Penalties for Non-Compliance
- Free Zones and TP Compliance
- Recent Updates as of 2026
- Best Practices for UAE Businesses
- FAQs on UAE TP Documentation
UAE Corporate Tax and Arm's Length Principle
The UAE's corporate tax (CT) at 9% on profits over AED 375,000 mandates arm's length pricing for controlled transactions to avoid base erosion. Related parties include entities under common control, permanent establishments, or those with >50% ownership overlap.
Non-compliance risks adjustments, penalties, and interest. Documentation demonstrates compliance, filed via Disclosure Form with CT returns or on FTA request within 30 days.
Who Needs TP Documentation?
All UAE taxable persons with related-party transactions must apply arm's length rules, but full documentation thresholds target larger entities:
- Master File & Local File: Revenue ≥ AED 200M or MNE group consolidated revenue ≥ AED 3.15B.
- Country-by-Country Report (CbCR): MNE group revenue ≥ AED 3.15B.
- Disclosure Form: Any related transactions exceeding de minimis (e.g., AED 4M goods/services).
Small businesses (
Document Type
Threshold
Mandatory for All Related Tx?
Disclosure Form
Any > de minimis
Yes
Master File
Revenue ≥ AED 200M or MNE ≥ AED 3.15B
No
Local File
Revenue ≥ AED 200M or MNE ≥ AED 3.15B
No
CbCR
MNE ≥ AED 3.15B
No
Three-Tier Documentation Structure
UAE adopts OECD's three-tier approach for transparency:
Master File
Global overview of MNE: organizational chart, business description, intangibles, intercompany financials, TP policies. Updated annually, submitted on request.
Local File
UAE-specific: entity details, controlled transactions (nature, amounts, contracts), economic analysis with benchmarking, TP method justification. Crucial for audits.
CbCR
Aggregated group data: revenue, profits, taxes, employees per jurisdiction. Ultimate parent files within 12 months; notifications required.
Disclosure Form summarizes transactions in CT return. For comprehensive compliance, check our Year-End Accounting Checklist for UAE 2026.
Accepted Transfer Pricing Methods
FTA recognizes five OECD methods; select "most appropriate" based on facts. Benchmarking uses databases for comparables, applying interquartile ranges.
Comparable Uncontrolled Price (CUP)
Best For: Commodities, standard goods
Resale Price Method
Best For: Distributors, resellers
Cost Plus Method
Best For: Manufacturers, service providers
Transactional Net Margin Method (TNMM)
Best For: Routine functions
Profit Split Method
Best For: Integrated operations
| Method | Best For | Formula Example |
|---|---|---|
| CUP | Commodities | Price = Market comparable |
| Resale Price | Distributors | Transfer Price = Resale Price × (1 - Gross Margin) |
| Cost Plus | Manufacturers | Transfer Price = Cost + Markup |
| TNMM | Routine functions | Net Margin vs. comparables |
| Profit Split | Integrated ops | Residual profit allocation |
Preparing and Maintaining Documentation
Prepare contemporaneously (end of tax period), retain 7 years. Follow these steps:
- Identify related parties and transactions
- Select and justify appropriate TP method
- Conduct benchmarking study using regional data
- Document analysis in Local/Master Files
- File Disclosure Form with CT return
- Store documentation securely for 7+ years
FTA requests trigger 30-day submission. Advance Pricing Agreements (APAs) expected from late 2025 for certainty.
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Our team at One Desk Solution prepares FTA-compliant Master Files, Local Files, and benchmarking studies. Explore our transfer pricing services.
Penalties for Non-Compliance
UAE imposes harsh deterrents for TP non-compliance. The FTA can adjust transactions to arm's length prices and impose significant penalties:
| Violation | Penalty Range |
|---|---|
| No TP Documentation | AED 20,000 |
| Incomplete Documentation | AED 10,000–50,000 |
| Late Submission | AED 1,000 per month |
| Intentional Mispricing | 300% tax + potential jail time |
TP adjustments attract 0–300% of underpaid tax plus 12% annual interest. Criminal penalties apply for tax evasion.
Free Zones and TP Compliance
Free zone persons (0% tax on qualifying income) must still document to prove substance and arm's length, avoiding PE attribution. For example, DMCC traders must benchmark margins against independent distributors.
Proper TP documentation strengthens claims for free zone benefits and prevents recharacterization of income. Learn more in our guide on Requirements for Group Companies in UAE.
Recent Updates as of 2026
January 2026 amendments refine UAE TP procedures:
- Stricter Disclosure Form requirements with lower thresholds
- APA (Advance Pricing Agreement) rollout expected late 2025/early 2026
- Enhanced alignment with OECD BEPS 2.0 standards
- Increased FTA audit activity post-2023 CT launch
- Digital submission requirements via EmaraTax portal
Stay updated with changing regulations through our Business Budgeting and Forecasting Services.
Best Practices for UAE Businesses
Annual Review
Conduct annual TP policy review before financial year-end to ensure ongoing compliance.
Regional Benchmarking
Use Middle Eastern data with appropriate adjustments for regional comparability.
Team Training
Train finance teams on TP principles and documentation requirements.
Integration
Integrate TP compliance with corporate tax and VAT reporting systems.
Expert Engagement
Engage TP experts early in transactions to structure arrangements properly.
Documentation
Maintain contemporaneous documentation with clear audit trails.
Expert Transfer Pricing Support
One Desk Solution provides comprehensive TP documentation, strategy, and compliance services in Dubai.
FAQs on UAE TP Documentation
Does TP documentation apply to individuals or only companies?
Answer: TP rules apply only to taxable persons (businesses) under UAE Corporate Tax Law. Individuals are generally not subject to TP documentation requirements unless conducting business activities.
Is specialized software mandatory for TP documentation?
Answer: No, specialized software is not mandatory. Excel, Word, and benchmarking databases suffice if they produce robust, FTA-compliant documentation. However, software can streamline the process for complex groups.
How frequently does FTA conduct TP audits?
Answer: The FTA uses risk-based auditing. High-risk indicators include large intercompany transactions, consistent losses, transactions with low-tax jurisdictions, and mismatches with industry benchmarks. Since 2023 CT implementation, audit frequency has increased significantly.
Can small businesses be exempt from TP documentation?
Answer: Small businesses with revenue below AED 200M (and not part of large MNEs) are exempt from Master/Local Files but must still complete the Disclosure Form and apply arm's length principles. They should maintain basic documentation to justify pricing if audited.
How does TP relate to Double Tax Treaties?
Answer: TP documentation supports claims under Double Tax Treaties by proving arm's length pricing, which helps prevent adjustments by treaty partners. Proper documentation is essential for accessing treaty benefits. Learn more in our guide on How Double Tax Treaties Work in UAE.
Master TP documentation proactively—it's not just compliance but a competitive advantage in UAE's evolving tax landscape.
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One Desk Solution (https://onedesksolution.com/), Dubai's premier VAT, tax, bookkeeping, and audit firm, excels in TP documentation, strategies, and cross-border compliance. We craft Master Files, Local Files, benchmarking studies, and APAs to minimize risks and optimize taxes.
Our end-to-end services ensure FTA-ready documentation for multinationals and SMEs alike.
