With UAE corporate tax in place, transfer pricing (TP) is a standing obligation for businesses with related-party or connected-person transactions. The FTA is reviewing these arrangements more closely in 2026.
Below is an overview of the UAE framework, when documentation and forms are required, the main economic methods, and recent developments on APAs and DMTT.
What Is Transfer Pricing?
Transfer pricing refers to the pricing mechanisms and terms established for transactions between Related Parties or Connected Persons under the same corporate umbrella. These transactions can encompass tangible goods, management services, intellectual property licensing, intercompany loans, or asset transfers.
Because these entities are under common control, their commercial interactions are not naturally subjected to standard market forces. Consequently, tax frameworks require these "controlled transactions" to match the financial dynamics of independent market transactions.
Intra-UAE transactions are not exempt. Transfer pricing is not limited to cross-border deals. A mainland company and its Free Zone affiliate must still meet TP rules. Domestic transactions do not fall outside the regime.
The UAE Legal Framework
The main sources are:
Federal Decree-Law No. 47 of 2022 (Corporate Tax Law): Articles 34 and 35 require controlled transactions to follow the Arm's Length Principle. Article 36 sets market value tests for Connected Persons (directors, shareholders, relatives, and similar). Article 55 covers documentation.
Ministerial Decisions No. 97 of 2023 and No. 301 of 2024: These set TP document content, maintenance thresholds, and a seven-year record retention period.
FTA Transfer Pricing Guide (CTGTP1): Aligned with the OECD Transfer Pricing Guidelines on benchmarking, comparability, and acceptable methods.
Who Must Comply? (Thresholds & Deadlines)
All taxable persons with related-party transactions must price them on arm's length terms. Formal documentation and filings depend on thresholds:
Small Business Relief: Taxpayers using Small Business Relief remain subject to arm's length pricing. Some disclosure or documentation requirements may not apply at lower revenue levels, but related-party prices must still reflect market terms.
| Compliance Obligation | Trigger / Threshold | Filing & Maintenance Deadline |
|---|---|---|
| TP Disclosure Form | Aggregate transactions > AED 40M, or > AED 4M per category | Filed annually alongside the Corporate Tax return. |
| Connected Persons Schedule | Aggregate payments/benefits to connected persons > AED 500,000 | Filed annually alongside the Corporate Tax return. |
| Local File | Standalone UAE revenue ≥ AED 200M, or group revenue ≥ AED 3.15B | Must be submitted within 30 days of an FTA request. |
| Master File | MNE group consolidated revenue ≥ AED 3.15B | Must be submitted within 30 days of an FTA request. |
| CbCR Notification | MNE group consolidated revenue ≥ AED 3.15B | Due by the final day of the financial year. |
| CbC Report (CbCR) | MNE group consolidated revenue ≥ AED 3.15B | Due within 12 months of the fiscal year-end. |
Note: UAE-only groups with no foreign entities are not required to prepare a Master File, but must still prepare a Local File if standalone revenue thresholds are met.
Core Economic Methodologies
To support the Arm's Length Principle (ALP), the FTA expects the most appropriate method for each case. The main methods are:
Comparable Uncontrolled Price (CUP): Compares the price in a controlled transaction to an uncontrolled transaction in comparable circumstances.
Resale Price Method (RPM): Looks at the gross margin on goods bought from a related party and resold to third parties.
Cost Plus Method: Measures markup on direct and indirect costs in providing goods or services.
Transactional Net Margin Method (TNMM): Compares net profit margin to an appropriate base (costs, sales, assets, etc.). This is the most widely used method in the UAE.
Profit Split Method: Splits combined profits or losses on integrated transactions by each party's contribution.
2026 Regulatory Updates
For 2026 corporate tax filings (including the September 30, 2026 deadline for December 2025 year-ends), two areas are worth noting:
Advance Pricing Agreement (APA) Programme
The FTA launched the APA programme in late December 2025. Businesses can agree transfer pricing methods in advance for greater certainty. The programme is rolling out in stages:
- Current phase (May 2026): Unilateral APAs (UAPAs) are available, including for domestic transactions.
- Later in 2026: Cross-border unilateral APAs are expected to follow.
- Not yet in place: Bilateral (BAPAs) and Multilateral APAs (MAPAs) involving foreign tax authorities are not fully implemented.
Eligibility: For a UAPA now, the aggregate arm's length value of the proposed domestic transactions must be at least AED 100 million per tax period.
DMTT and Transfer Pricing
MNEs within the 15% Domestic Minimum Top-Up Tax (DMTT) need accurate related-party pricing. Mispriced transactions can affect the local Effective Tax Rate (ETR) and lead to top-up tax under OECD Pillar Two.
Common Mistakes
FTA reviews and filings often show the same issues:
Treating intra-UAE deals as out of scope. The FTA reviews mainland-to-Free Zone structures to limit profit shifting to 0% zone entities. Domestic borders do not remove TP obligations.
Weak management fee support. Management charges, shared services, and head-office recharges need evidence of services rendered and benefit received. A contract alone may not be enough without logs, allocation keys, or timesheets.
Entity-level benchmarking only. Testing only the whole company's margin, instead of specific transaction types, is a common gap. Transaction-level analysis is required where it is practical.
Downward adjustments without FTA approval. If intercompany prices were too high, you cannot reduce tax on your own. Downward adjustments need prior FTA approval.
Next Steps
TP support should be in place before an audit, not assembled afterwards. The FTA allows 30 days to submit Local and Master Files when requested, so records should be kept as transactions occur.
- Conduct a TP diagnostic: map intercompany flows, agreements, and funding against reporting thresholds.
- Put intercompany agreements in place that match functions, risks, and actual arrangements.
- Use OECD-accepted databases to test that margins sit within accepted ranges.
How NPV Vardhman Can Help
We advise on domestic and cross-border transfer pricing under UAE corporate tax rules, including benchmarking, APA applications, and Local and Master Files. Contact us if you would like to discuss your group's position for 2026.
This article is intended for general informational purposes only and does not constitute legal or tax advice. Businesses should seek professional advice tailored to their specific facts and circumstances.
