Transfer Pricing Documentation & Arm's Length Price Advisory (UAE) — What to Get Right Before You Start
UAE Corporate Tax made transfer pricing a live compliance obligation, not a theoretical risk. Under Federal Decree-Law No. 47 of 2022 and the OECD-aligned arm's length principle it adopts, every UAE business with related-party or connected-person transactions — cross-border or purely domestic between mainland and Free Zone entities, between UAE group companies, or between a UAE entity and its foreign parent or subsidiaries — now needs contemporaneous documentation that proves pricing was set as if the parties were unrelated.
What You're Really Buying
Transfer pricing documentation and arm's length price advisory is the discipline of pricing, documenting and defending transactions between related parties and connected persons so that profits are not artificially shifted between entities to reduce overall tax. The UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022, effective for financial years starting on or after 1 June 2023) mandates that all transactions and arrangements between Related Parties, and payments or benefits provided to Connected Persons, must be conducted on arm's length terms — meaning the pricing, terms and conditions must be consistent with what independent parties would have agreed in comparable circumstances.
For the full scope, current process and what PNPC includes, see the dedicated Transfer Pricing Documentation & Arm's Length Price Advisory (UAE) service page.
Signs This Applies to You
- The business has transactions with related parties — a foreign parent, subsidiary, or sister company outside the UAE, or a UAE group entity under common ownership including a Free Zone affiliate — above the disclosure thresholds under Ministerial Decision No.
- A UAE Free Zone Person claims Qualifying Free Zone Person status and 0% tax on Qualifying Income — arm's length pricing on transactions with related mainland or foreign group entities is a precondition to defending that status on audit, since mispriced intercompany dealings can shift income out of the Qualifying Income category
- The company is part of a Multinational Enterprise Group and meets the consolidated group revenue or standalone revenue threshold that triggers mandatory Master File and Local File preparation
- Owners, directors or related individuals draw remuneration, rent, or other benefits from the company (Connected Person payments) that need to be benchmarked to market terms to remain deductible for Corporate Tax purposes
When It Isn't the Right Fit
- A standalone UAE business with no related-party or connected-person transactions of any kind — the arm's length rules apply only where a qualifying relationship exists; a genuinely independent single entity has no transfer pricing exposure to document
- Related-party transaction values fall below the disclosure and documentation thresholds prescribed by the Ministry of Finance — a light-touch review to confirm this is still worthwhile, but a full Master File/Local File build is not required
- The business itself, and its group, are exempt persons or otherwise outside the scope of UAE Corporate Tax (subject to conditions being met and maintained) — though disclosure obligations can still arise depending on structure and should be checked, not assumed away
Common Questions
What is 'arm's length' pricing, in plain terms, under UAE Corporate Tax?
It means related parties must price their transactions with each other — goods, services, loans, royalties, management fees — as if they were unrelated, independent businesses negotiating at market terms. Article 34 of the Corporate Tax Law requires this for all Related Party and Connected Person transactions. The point is to stop profit being shifted between entities (for example, from a 9%-taxed mainland company to a 0%-taxed Qualifying Free Zone Person, or out of the UAE to a lower-tax foreign affiliate) purely through artificial pricing rather than genuine commercial terms.
Does transfer pricing apply to us if we are a purely UAE business with no foreign parent or subsidiary?
Yes, if you have related-party transactions within the UAE. Article 35's definition of Related Parties is based on ownership and control thresholds, not geography. Two UAE companies under common ownership, or a UAE mainland entity and its UAE Free Zone affiliate, are related parties for Corporate Tax purposes regardless of the fact that no foreign entity is involved.
What counts as a 'Connected Person' and why does it matter separately from 'Related Party'?
Connected Persons under Article 36 are broadly the owners of the taxable person, directors and officers, and their relatives, plus certain related entities. Payments or benefits provided to Connected Persons — salary, rent on premises they own, interest on loans they have advanced to the company — must also be at market value to be deductible for Corporate Tax purposes. The distinction matters because Connected Person rules focus on deductibility of specific payments, while Related Party rules under Article 34 focus on the pricing of transactions between entities generally.
Getting This Right From the Start
Talk to PNPC's Dubai transfer pricing desk before the FTA does — a contemporaneous, defensible Local File built now costs a fraction of a reconstructed one built under a 30-day audit deadline.
PNPC Global has advised Dubai businesses since 1986. Explore the full NRI & Cross-Border Compliance practice for related services, or go straight to the Transfer Pricing Documentation & Arm's Length Price Advisory (UAE) page for specifics.
This is a general explainer, not a substitute for checking today's rules with PNPC or the relevant authority — figures and deadlines move, so none are quoted here as fixed.