UAE Transfer Pricing 2026 : Compliance Guide for FY 2025

Transfer pricing in the UAE is governed by Articles 34–36 of the Corporate Tax Law and the FTA’s Transfer Pricing Guide (October 2023). All transactions between related parties must comply with an arm’s length — including intra-UAE transactions between a mainland entity and its free zone affiliate. Companies with UAE revenue of AED 200 million or more, or group consolidated revenue of AED 3.15 billion or more, must maintain a Master File and Local File, must be available to the FTA within 30 days upon request.

 

The TP Disclosure Form is filed annually with the corporate tax return — with key compliance deadlines arising in 2026, including 30 September 2026 for taxpayers having December 2025 financial year-end. Non-compliance may result in penalties under Cabinet Decision No. 75 of 2023.

 

The introduction of UAE Corporate Tax in June 2023 changed the compliance landscape for thousands of businesses operating here. Among the most significant new obligations — and the one that catches many CFOs off guard — is Transfer Pricing. 

 

Transfer pricing is not a new concept globally, but the introduction of corporate tax has brought transfer pricing into focus as a key compliance requirement for UAE businesses. The rules apply broadly, the documentation obligations are substantive, and scrutiny is expected to increase as the UAE enters a more mature phase of corporate tax compliance.

 

This guide covers the transfer pricing framework: what it is, whom it applies to, what you are required to do, and where the risks lie. 

What Is Transfer Pricing? 

Transfer pricing refers to the prices set for transactions between related parties within the same group of companies. These transactions can involve goods, services, intellectual property, loans, assets, or any other commercial arrangement. Since, the parties are related, their transactions may not be subject to the same market forces as those between independent parties, creating a need to ensure that pricing reflects arm’s length conditions.  

 

 This creates a risk that pricing may be influenced in a manner that does not reflect market conditions, potentially affecting the allocation of profits across jurisdictions. Transfer pricing rules are therefore designed to ensure that such transactions are priced in accordance with the arm’s length principle. 

 

In the UAE, the Federal Tax Authority defines a controlled transaction as any transaction or arrangement between parties that are related parties or connected persons under the Corporate Tax Law. Crucially, this includes transactions that take place entirely within the UAE — for example, between a mainland operating company and its free zone affiliate. The domestic nature of the transaction does not provide an exemption. 

The UAE Legal Framework 

The UAE’s transfer pricing framework rests on three pillars: 

 

Federal Decree-Law No. 47 of 2022 (the Corporate Tax Law) establishes the foundational obligation. Articles 34 and 35 require all controlled transactions to comply with the arm’s length principle. Article 36 addresses connected persons — directors, shareholders, and their relatives — who are subject to a market value test rather than a full arm’s length analysis. Article 55 sets out the documentation obligations. 

 

Ministerial Decision No. 97 of 2023 (superseded in part by Ministerial Decision No. 301 of 2025 for certain provisions) specifies the content requirements for the Master File and Local File, the thresholds that trigger mandatory documentation, and the seven-year record retention obligation. 

 

The FTA Transfer Pricing Guide (CTGTP1, October 2023) is the authoritative interpretive document. It follows the OECD Transfer Pricing Guidelines and provides detailed guidance on comparability analysis, TP method selection, documentation standards, and the arm’s length range. 

 

Together, these instruments align the UAE with international best practice — and signal that the FTA intends to administer transfer pricing with the same rigour applied in comparable jurisdictions.

Who Does Transfer Pricing Apply To? 

Transfer pricing rules apply to every UAE taxable person that enters into transactions with related parties or connected persons — regardless of the size or nature of the transaction. There is no minimum transaction value below which the arm’s length principle is waived. 

 

However, the documentation and disclosure obligations are calibrated by threshold: 

 

 

Even businesses that fall below the documentation thresholds are not off the hook. They must still price all related party transactions at arm’s length and be prepared to substantiate that pricing if the FTA requests an explanation. 

The Arm’s Length Principle 

The arm’s length principle (ALP) is the cornerstone of every transfer pricing framework. It requires that the conditions of a controlled transaction — including price, margin, terms, and risk allocation — reflect what independent parties would have agreed under comparable circumstances. 

 

In practice, applying the ALP involves a structured analysis:

 

Step 1 — Delineate the transaction. Identify what was actually transferred, who bore the risks, and who performed the functions. The economic substance of the arrangement matters more than its legal form. 

 

Step 2 — Conduct a comparability analysis. Identify comparable uncontrolled transactions or companies against which the controlled transaction can be benchmarked. Comparability factors include the nature of the goods or services, contractual terms, functional and risk analysis between the entities, economic circumstances, and business strategies. 

 

Step 3 — Select the most appropriate TP method. As recognized in the UAE Transfer Pricing Guide (October 2023) from the OECD Guidelines: 

 

 

Step 4 — Determine the arm’s length range. The interquartile range of the benchmarking results is the standard arm’s length range. A result at or above the median is commonly used in practice for UAE TP analyses. 

 

Step 5 — Document and maintain. The analysis, method selection, comparable, and conclusions must be documented contemporaneously — meaning at the time the transaction is made, not retrospectively during potential FTA review. 

 

The burden of proof rests entirely with the taxpayer. The FTA has the authority to adjust taxable income where it determines that a controlled transaction was not at arm’s length, and corresponding adjustments will be reflected in the taxable income of the related party. 

The Four Key Compliance Obligations 

1. The TP Disclosure Form

The Disclosure Form is the primary annual compliance touchpoint. It is filed as part of the corporate tax return and requires disclosure of each related party transaction above the threshold, including the transaction type, the TP method used, the arm’s length value determined, and any adjustments made. The FTA uses this data to prioritise audit activity. 

 

2. The Local File

The Local File is an entity-specific document covering the UAE taxable person’s related party transactions in detail. It includes a functional analysis (what the entity does, the risks it bears, the assets it uses), a description of each controlled transaction, the TP method applied, the benchmarking analysis, and the conclusions drawn. It must be available to the FTA within 30 days upon request. 

 

3. The Master File

The Master File provides the FTA with a high-level overview of the MNE group’s global operations, its value chain, its TP policies, and its global allocation of income and economic activity. It is required only where the MNE group’s consolidated revenues exceed AED 3.15 billion. UAE-only groups — where all entities are UAE-resident — are not required to prepare a Master File, though they must still prepare a Local File if they meet the standalone revenue threshold. 

 

4. Country-by-Country Reporting (CbCR)

Larger MNE groups must file a Country-by-Country Report with the FTA annually, disclosing revenue, profit before tax, income tax paid, employees, and tangible assets by jurisdiction. This data is exchanged with tax authorities in other jurisdictions under the OECD’s automatic exchange framework, making it a powerful tool for identifying profit-shifting patterns. 

 

What Is New in 2026 

Since the first reporting year has been completed, certain developments have taken place and requires attention. 

 

The Advance Pricing Agreement (APA) programme: In December 2025, the FTA formally introduced its APA programme under the Corporate Tax regime. Unilateral APAs (UAPAs) are available first, with bilateral and multilateral APAs to follow. An APA is a binding agreement between the taxpayer and the FTA on the arm’s length price of specified controlled transactions for a defined future period.

 

To apply, the aggregate arm’s length value of the transactions covered must be at least AED 100 million per tax period. For businesses with significant and recurring related party transactions, an APA provides the clearest available certainty and eliminates the risk of FTA challenge for the covered period. 

 

Domestic Minimum Top‑up Tax (DMTT): A major international tax development that transitioned into 2026 compliance is the implementation of the UAE Domestic Minimum Top‑up Tax (DMTT), effective for financial years beginning on or after 1 January 2025. The DMTT aligns the UAE with the OECD/G20 Pillar Two global minimum tax framework, requiring in‑scope multinational enterprise (MNE) groups with global revenues of at least EUR 750 million to achieve a minimum effective tax rate of 15 % on profits in the UAE.

 

Under the framework, if an MNE’s UAE effective tax rate falls below the minimum, a top‑up tax may apply to bridge the gap. The regime forms part of the UAE’s ongoing efforts to align its tax structure with international standards on base erosion and profit shifting (BEPS). 

 

Ongoing Compliance and Regulatory Maturation: As the first TP disclosure cycles are completed and audit programmes begin, businesses are moving from transition and preparation toward execution and enforcement. This includes refinements to documentation practice, benchmarking standards, and alignment of TP outcomes with broader tax planning, especially for multinational group structures impacted by Pillar Two considerations. 

Common Mistakes UAE Businesses Make 

Based on experience with UAE taxpayers and early FTA audits, the most frequent transfer pricing errors after the first CT filing cycle include: 

 

Treating intra-UAE transactions as exempt: The arm’s length principle applies to all controlled transactions, including those between entities in the same emirate or between a mainland and free zone entity within the same group. Businesses that assumed domestic transactions were outside TP scope are now scrambling to prepare documentation they do not have. 

 

Relying on entity-level rather than transactional benchmarking: The FTA Guide is explicit: benchmarking must be conducted at the transactional level, not by testing the entity’s overall profitability. An entity-level TNMM applied to a business with multiple transaction types will not satisfy the FTA requirements. 

 

Insufficient documentation for management fees: Intra-group management service charges are one of the FTA’s highest-scrutiny areas. The taxpayer must demonstrate that the services were rendered (the actual rendition test) and that the recipient obtained genuine economic benefit (the benefit test). A memorandum of understanding alone is insufficient. 

 

Overlooking connected persons: Key Management Personnel compensation — where a director or shareholder is also receiving payments from the business — is subject to a market value test and must be disclosed where aggregate payments exceed AED 500,000. Many businesses have not assessed whether their KMP remuneration withstands scrutiny. 

 

Applying downward adjustments without prior FTA approval: If a taxpayer determines that its related party pricing resulted in taxable income that should be reduced, they cannot simply make the adjustment in their return. Downward adjustments require prior FTA approval — submitting without approval creates a compliance risk.

Retrospective corrections and late documentation (2026 emphasis):

With the first TP disclosure cycle complete, businesses attempting to fix gaps retrospectively are learning the importance of timely, contemporaneous documentation. The FTA increasingly expects records to be available for all controlled transactions upon request, and delays may trigger penalties. 

How NRD Helps 

NR Doshi & Partners has been advising businesses on UAE tax and regulatory compliance for over 40 years. Our transfer pricing practice combines deep local knowledge with the technical depth of a DFK International member firm — the 7th largest accounting association in the world. 

 

We work with CFOs, Finance Directors, and Tax Managers across every sector to build transfer pricing positions that are commercially rational, technically defensible, and documented to FTA standards. Our services include: 

 

• TP health checks and gap assessments for the first and ongoing CT filing cycles 

• Master File and Local File preparation 

• Benchmarking studies using OECD-approved databases 

• TP Disclosure Form review and completion 

• Country-by-Country (CbCR) Reporting notification and filing 

• APA applications under the FTA’s new programme 

• FTA enquiry support and representation 

 

Transfer pricing is not a compliance exercise you want to address for the first time after the FTA has raised a query. The 30-day documentation window closes quickly, and contemporaneous documentation prepared after the fact rarely satisfies a regulator. Partnering with experienced advisors ensures your transfer pricing positions are robust, compliant, and defensible.  

 

NR Doshi & Partners is a leading UAE audit, tax, and advisory firm with over 40 years of experience serving businesses across the UAE and internationally. For transfer pricing advice tailored to your business, contact our team at enquiries@nrdoshi.ae or call +971 4 352 8001.