UAE Free Zone Company Transfer Pricing Rules 2026 — Related Party Transactions
UAE corporate tax introduces transfer pricing rules that affect UAE free zone companies with related party transactions. Here is the 2026 guide.
In this guide:
What Is Transfer Pricing?
Transfer pricing refers to the prices charged in transactions between related parties (group companies, parent-subsidiary, shareholder-company). UAE CT law requires related party transactions to be priced at “arms length” — the same price that would be charged between unrelated parties.
Who Is a “Related Party” Under UAE CT?
- A company and its owner (when the company pays the owner a salary, rent, or fees)
- Group companies (parent, subsidiary, sister companies with common ownership)
- Companies with 50%+ common ownership
- Business partners with significant influence
UAE Transfer Pricing Disclosure Requirements
- Businesses with related party transactions exceeding AED 40 million must disclose: Transfer Pricing Disclosure Form (Part of CT return)
- Businesses with related party transactions exceeding AED 200 million must maintain: Master File and Local File (formal transfer pricing documentation)
- Small businesses (below AED 40 million related party transactions): No formal TP documentation but must still apply arms length principle
Common Related Party Transactions in UAE Free Zone Companies
- Director salary: If you pay yourself a salary that departs significantly from market rate, this is a related party transaction
- Management fees: Paying a parent company management fees
- Loans between group companies
- IP licensing within a group (royalties paid between group entities)
- Services between group entities (shared services, back-office)
Penalty for Incorrect Transfer Pricing
If FTA determines a related party transaction was not at arms length, it can adjust the taxable income to reflect the arms length price. This may result in additional CT liability plus penalty interest.