Transfer pricing rules in the uae

Redefining Transfer Pricing with Precision, Integrity, and Insight

The UAE introduced Transfer Pricing (“TP”) regulations as part of its Corporate Tax Law
under Federal Decree-Law No. 47 of 2022, which applies to tax periods starting on or after
1 June 2023. Businesses must comply with these rules to ensure that transactions between
related parties are conducted at arm’s length (fair market value).

Key legal references for TP compliance:

Who Must Follow Transfer Pricing Rules?

TP rules apply to all taxable businesses that engage in transactions with Related Parties or Connected Persons. Even if a business is exempt from tax or qualifies for small business relief, it must still follow TP rules but may not be required to maintain full TP documentation.

What are the Transfer Pricing Documentation Requirements?

Businesses that engage in transactions with Related Parties or Connected Persons may be
required to prepare TP documentation. The key requirements include:

1.Transfer Pricing Disclosure Form

All Taxable Persons who undertake transactions
with Related Parties or Connected Persons (domestic or foreign) in the reporting Tax Period and are above a materiality threshold specified below, are required to prepare and submit a general Transfer Pricing disclosure form, alongside their Tax Return.

• Primary Threshold: Aggregate value of all transactions with all related parties
exceeds AED 40 million.
• Secondary Threshold: Aggregate value of transactions per category with all related
parties exceeds AED 4 million.

Once this primary threshold is surpassed, individual transaction categories exceeding AED 4 million must also be disclosed.

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2.Local and Master File

A Taxable Person is required to maintain both a Master File and a Local File if it meets either one of the following two conditions:

• It is a Constituent Company of an MNE Group with a total consolidated group
revenue of at least AED 3,150,000,000 in the relevant Tax Period or
• If their own revenue for the same period meets or exceeds AED 200,000,000.

The documentation must be prepared by the time the Taxable Person submits its Tax
Return for the Tax Period in which the Controlled Transaction is undertaken.
Master Files and Local Files must be made available to the FTA within 30 days upon
request.

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3. Country-by-Country Report

The Country-by-Country report provides jurisdictional
quantitative information about an MNE Group and applies to businesses that are part of
an MNE Group with consolidated revenue exceeding 3.15 billion AED.

4. Additional supporting information

May be requested by the Federal Tax Authority (FTA).

Let’s Talk Transfer Pricing

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What is the definition of a related party?

Related parties are defined under Article 35 of the Corporate Tax Law as any associated Persons, which is defined through:

Kinship or affiliation: Individuals who are related up to the fourth degree of kinship or
affiliation;
Ownership: One or more persons directly or indirectly owning 50% or a greater
interest in another juridical person; or
Control: Direction and influence over another in exercising 50% or more of the voting
rights, or controlling 50% or more of the board of directors, or being able to receive
50% or more of the profits of another person.

What is the definition of Connected Persons?

A person is considered a Connected Person of a taxable person if that person is:

An individual, who directly or indirectly owns an ownership interest in the Taxable
Person or Controls such Taxable Person;
A director or officer of the Taxable Person, or a Related Party of the said director or officer; or
A partner in an Unincorporated Partnership, and any Related Parties of such partner.

Key Takeaways

DISCLAIMER

This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.

April 2025

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