Transfer Pricing Documentation Requirements for UAE Businesses

UAE Corporate Tax Law requires transactions between related parties and connected persons to be conducted on an arm's length basis, meaning on terms comparable to what unrelated parties would agree to, and businesses meeting certain thresholds need to maintain specific documentation demonstrating that their related party pricing meets this standard.

The two main documentation requirements are a Master File, which provides a high-level overview of the broader multinational group's global business operations and transfer pricing policies, and a Local File, which contains detailed information specific to the UAE entity's related party transactions, including the pricing methodology applied and comparable transaction analysis supporting the arm's length nature of those prices. These requirements generally apply to businesses exceeding specific revenue or related party transaction value thresholds set out in the Corporate Tax Law's implementing decisions, meaning many smaller UAE businesses with modest related party dealings may fall below the mandatory documentation threshold, though the underlying arm's length requirement still applies to their pricing regardless.

Common related party transactions requiring transfer pricing consideration include intercompany loans and their interest rates, management fees charged between group companies, shared service arrangements, royalty payments for use of group intellectual property, and goods or services transacted between related entities in different jurisdictions or between mainland and free zone entities within the same group. Businesses also need to submit a disclosure form alongside their corporate tax return summarizing related party transactions, separate from the more detailed Master File and Local File documentation itself.

Given that transfer pricing methodology assessment involves economic and comparability analysis that goes well beyond standard accounting, and that the UAE's transfer pricing rules are closely aligned with OECD guidelines that many multinational groups are already familiar with from other jurisdictions, businesses with meaningful related party dealings should engage a transfer pricing specialist to assess their documentation obligations and ensure their intercompany pricing policies are properly supported, rather than treating this as a standard bookkeeping matter.