UAE Transfer Pricing Rules for Free Zone Companies 2026
UAE Corporate Tax law introduced formal transfer pricing (TP) rules that apply to UAE businesses transacting with related parties. Here is what UAE free zone companies need to know about transfer pricing in 2026.
- UAE Transfer Pricing Rules for Free Zone Companies 2026
- What is Transfer Pricing?
- UAE Transfer Pricing Rules — Legal Basis
- Who Does UAE Transfer Pricing Apply To?
- UAE Transfer Pricing Documentation Requirements
- Transfer Pricing for UAE Free Zone Companies with Offshore Structures
- Frequently Asked Questions
What is Transfer Pricing?
Transfer pricing refers to the prices charged between related companies (e.g., a UAE free zone company and its parent company in another country) for goods, services, intellectual property, or financial transactions. Tax authorities globally require these prices to follow the “arm’s length principle” — i.e., the same price that unrelated parties would charge each other.
UAE Transfer Pricing Rules — Legal Basis
UAE Federal Decree-Law No. 47 of 2022 (UAE CT Law) introduced transfer pricing requirements:
- Article 34: Arm’s length principle applies to all transactions between related parties
- Article 35: UAE businesses must maintain transfer pricing documentation
- Ministerial Decision No. 97 of 2023: Sets out transfer pricing documentation requirements and thresholds
Who Does UAE Transfer Pricing Apply To?
UAE TP rules apply to all UAE businesses subject to UAE CT (including most free zone companies) that:
- Have transactions with related parties (shareholder companies, subsidiaries, affiliates), OR
- Have transactions with connected persons
Related party includes: parent companies, subsidiaries, companies with the same owner, and persons who can influence the UAE company.
UAE Transfer Pricing Documentation Requirements
UAE TP documentation is required at two levels:
1. Master File (Group-Level Documentation)
Required if the UAE business is part of a group with consolidated revenue exceeding AED 3.15 billion (threshold for Pillar Two application). Contains: group structure, business description, intangibles held, intercompany financial activities.
2. Local File (Entity-Level Documentation)
Required if the UAE business has related party transactions exceeding AED 40 million in a tax period. Contains: description of related party transactions, TP method used, benchmarking analysis.
Transfer Pricing for UAE Free Zone Companies with Offshore Structures
A common scenario: a UAE free zone company (IFZA or DMCC company) that provides services to its British Virgin Islands (BVI) parent or a Cayman Islands holding company. In this case:
- The UAE free zone company must price its services to the offshore parent at arm’s length
- If the UAE company charges artificially low prices to shift profit to the offshore parent, the FTA may adjust the UAE company’s taxable income upward
- The reverse (offshore parent charging the UAE company inflated management fees) is also scrutinised
Frequently Asked Questions
Does a small IFZA company with a BVI parent need formal TP documentation?
If the IFZA company’s related party transactions are below AED 40 million in the tax period, formal Local File documentation is not mandatory. However, you must still apply the arm’s length principle and should be able to demonstrate this if the FTA asks. Small businesses with straightforward intercompany transactions (e.g., a sole consultant company with one shareholder and no complex intercompany pricing) typically have very limited TP risk in practice.