UAE Corporate Tax introduced transfer pricing rules requiring related party transactions to be conducted at arm’s length. Here is a complete guide to UAE transfer pricing in 2025.
UAE Transfer Pricing Overview
Under UAE Corporate Tax (Federal Decree-Law No. 47 of 2022), related party transactions must comply with the arm’s length principle. The arm’s length principle: transactions between related parties must be priced as if they were between unrelated parties dealing at market rates. Related parties: individuals and companies connected by common ownership (25%+ shareholding) or control, family members, directors and the companies they control, and the UAE company and its free zone / offshore subsidiaries.
UAE Transfer Pricing Documentation
UAE transfer pricing documentation requirements: Local File: Detailed description of the UAE entity’s business, related party transactions, and pricing methodology used. Required for: entities with related party transactions above certain thresholds (as specified in FTA guidance). Master File: Group-level overview of business operations, value chain, and intercompany pricing policies. Required for: UAE entities that are part of a multinational group with global revenue above AED 3.15 billion (EUR 750 million equivalent). Country-by-Country Report (CbCR): Entity-level financial data for multinational groups exceeding the AED 3.15 billion global revenue threshold. CbCR filed by the UAE parent entity or a surrogate filer.
Key Transfer Pricing Methods
Accepted UAE transfer pricing methods (aligned with OECD guidelines): Comparable Uncontrolled Price (CUP): compare the related party price to a price in a comparable uncontrolled transaction. Cost Plus: add a mark-up to the costs of the supplier. Resale Price: deduct a gross margin from the resale price to arrive at the arm’s length purchase price. Transactional Net Margin Method (TNMM): compare the net profit margin of the tested party to comparable uncontrolled transactions. Profit Split: split the combined profit of related parties based on each party’s contribution.