UAE transfer pricing rules under Ministerial Decision No. 97 of 2023 require that every transaction between related parties — intercompany loans, service fees, royalties, supply of goods — must be priced as if between independent parties. The FTA actively scrutinises group transactions and penalties for non-disclosure start at AED 20,000. Essence Accounting prepares your Master File, Local File, benchmark analysis, and CT return disclosure so your transfer pricing is defensible, compliant, and filed on time.
Transfer pricing refers to the prices charged in transactions between related parties — companies within the same corporate group, or individuals with significant influence over a business. Under the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and Ministerial Decision No. 97 of 2023, all such transactions must comply with the arm's length principle: the price must be the same as what independent, unrelated parties would agree in comparable circumstances.
Before the introduction of UAE corporate tax, transfer pricing was largely a theoretical concern for most businesses. That has changed fundamentally. From tax periods beginning on or after 1 June 2023, every UAE taxable person with related-party transactions must: (1) apply arm's length pricing to those transactions, (2) disclose related-party transactions in their corporate tax return using the designated schedule, and (3) maintain formal documentation where the applicable thresholds are met. The FTA has the authority to disregard or adjust any transaction that does not reflect arm's length terms — increasing the taxable income of the UAE entity and potentially triggering additional corporate tax, penalties, and interest.
Transfer pricing compliance is not merely a documentation exercise. It requires economic analysis, access to benchmarking databases, and detailed knowledge of OECD transfer pricing guidelines as adopted in UAE law. Essence Accounting brings this expertise to UAE businesses of all sizes — from SMEs with simple intercompany loans to multinational groups with complex intra-group supply chains requiring Master File, Local File, and Country-by-Country Reporting.
UAE transfer pricing obligations apply at different levels depending on your business size and transaction volumes. Understanding which tier applies to your group is the first step to compliance.
Every UAE taxable person with related-party transactions must disclose those transactions in their corporate tax return, regardless of size or turnover. The CT return includes a dedicated related-party transactions schedule requiring details of counterparties, transaction types, amounts, and TP methods applied. Failure to complete this schedule triggers an AED 20,000 penalty per violation. This obligation applies universally — there is no minimum threshold for CT return disclosure.
A formal Local File must be prepared if your related-party transactions in a tax period exceed AED 200 million in aggregate, OR if your total assets exceed AED 15 million. The Local File contains entity-level information, details of each controlled transaction, a functional analysis (functions, assets, risks), the TP method selected, benchmarking comparables, and the arm's length conclusion. It must be ready within 30 days of an FTA request and is not filed with the return.
Groups with consolidated annual revenue of AED 3.15 billion or more must also prepare a Master File covering the entire group's global operations, organisational structure, business descriptions, intangibles, intercompany financial activities, and group financial and tax positions. The Master File provides the FTA with a high-level overview of the group's transfer pricing framework and how UAE entities fit within the wider group structure.
UAE-headquartered multinational groups with consolidated revenue of AED 3.15 billion or more must file a Country-by-Country Report (CbCR) with the Ministry of Finance under Cabinet Decision No. 44 of 2020. The CbCR includes jurisdiction-by-jurisdiction data on revenues, profits, taxes paid, employees, assets, and related-party transactions across the entire group. CbCRs are exchanged between tax authorities under international information exchange agreements.
All intercompany loans between UAE entities and related parties — domestic or cross-border — must bear an arm's length interest rate. Zero-interest or below-market rate loans will be adjusted by the FTA. UAE thin capitalisation rules under the CT Law also cap interest deductions where related-party debt is excessive relative to equity, making proper TP analysis of all financing arrangements essential for group treasury functions.
Qualifying Free Zone Persons (QFZPs) enjoy a 0% corporate tax rate on qualifying income. However, if a QFZP enters into transactions with related parties at non-arm's length prices, those transactions can be adjusted and qualifying income status can be lost — triggering the full 9% CT rate on affected income. Transfer pricing compliance is existential for QFZPs who wish to preserve the free zone tax benefit.
The UAE FTA follows OECD guidelines and accepts five approved transfer pricing methods. Taxpayers must apply the most appropriate method for each transaction type, supported by a benchmarking analysis.
Compares the price in a controlled transaction to the price in a comparable uncontrolled transaction between independent parties. The most direct method — best applied to commodity transactions, financial instruments, and loans where reliable market comparables exist and the pricing is readily observable.
Compares the gross margin earned by a reseller in a controlled transaction to the gross margins of independent distributors performing comparable functions. Best suited to distribution arrangements where the reseller does not add significant value through transformation before onward sale to third-party customers.
Applies a market-level mark-up to the costs incurred by a supplier of goods or services in a controlled transaction. Frequently used for contract manufacturers, routine service providers, and intragroup back-office service providers where cost is the primary driver of value and functional comparables are available.
The most widely used method globally — compares the net profit margin (relative to costs, revenues, or assets) earned in a controlled transaction to comparable uncontrolled transactions. Highly flexible and well-supported by commercial benchmarking databases; commonly applied to service, distribution, and manufacturing arrangements in the UAE.
Divides combined profits from a controlled transaction between related parties in a manner consistent with what independent parties would agree. Applied to highly integrated transactions, joint intangible development, or where both parties make unique and valuable contributions that make one-sided methods unreliable.
Regardless of the method selected, a benchmarking analysis using commercial databases is required to identify comparable transactions and establish the arm's length range. Essence Accounting has access to professional benchmarking databases and prepares UAE-specific comparability analyses that withstand FTA scrutiny — at accessible pricing for SMEs and mid-market businesses.
Our structured six-step approach takes you from initial mapping of related-party transactions through to annual maintenance — ensuring full compliance with Ministerial Decision No. 97 of 2023 and correct disclosure in your corporate tax return.
Start Your TP ReviewWe identify all related parties and connected persons in your group structure, and catalogue every intercompany transaction by type — sales of goods, services, loans, IP licences, management fees, cost-sharing arrangements. This transaction map becomes the foundation of your Local File and CT return disclosure schedule.
For each material transaction, we perform a functional analysis (identifying functions performed, assets used, and risks assumed by each party) and select the most appropriate OECD transfer pricing method — CUP, RPM, Cost Plus, TNMM, or Profit Split — documented with full economic reasoning.
We run a benchmarking search using professional transfer pricing databases to identify independent companies performing comparable functions. We establish an arm's length range — typically the interquartile range — against which your intercompany prices are tested and, where necessary, adjusted to fall within the range.
Where documentation thresholds are met, we prepare a complete Local File (and Master File if required) in the format prescribed by Ministerial Decision No. 97 of 2023. Documentation is prepared contemporaneously — ready before the CT return is filed, available to the FTA within 30 days of request.
We complete the related-party transactions schedule in your CT return accurately, ensuring all required fields are populated and the disclosure is fully consistent with your Local File. This eliminates the AED 20,000 non-disclosure penalty risk and provides a coherent, defensible audit trail.
Transfer pricing documentation must be reviewed each year. Intercompany prices must be refreshed against current benchmarks, documentation must reflect structural changes, and CT return disclosures must remain consistent with the underlying transactions. We provide annual TP maintenance to keep your compliance current and audit-ready.
As FTA-registered tax agents (TAN 30006266), we can represent your business in all FTA transfer pricing enquiries, respond to information requests, and attend FTA meetings on your behalf. Our deep understanding of UAE CT law and Ministerial Decision No. 97 means your documentation is prepared to FTA standards from day one.
We have deep working knowledge of Ministerial Decision No. 97 of 2023 and Cabinet Decision No. 44 of 2020 on country-by-country reporting. Our documentation precisely follows the format and content requirements prescribed by these instruments, minimising audit exposure and ensuring your records withstand FTA scrutiny.
Robust transfer pricing documentation requires access to commercial databases of comparable companies. Essence Accounting uses professional benchmarking databases to produce statistically valid arm's length ranges — the same quality as Big 4 firms, but at a fraction of the cost for UAE SMEs and mid-market businesses with genuine compliance needs.
We produce complete Master File and Local File documentation meeting UAE regulatory requirements, with clear functional analyses, economic justifications, and benchmark support. We also draft or review intercompany agreements to ensure your contractual terms align with the economic reality of your group's operations — a common FTA audit focus area.
Transfer pricing is a recurring compliance obligation that evolves as your business grows. We provide annual TP maintenance — refreshing benchmarks, updating documentation for structural changes, reviewing new intercompany arrangements, and confirming CT return disclosures remain accurate. Ongoing maintenance is far more cost-effective than reactive compliance after an FTA audit commences.
Our transfer pricing work is integrated directly with your corporate tax return preparation. The related-party transactions schedule in your CT return is completed by the same team that prepared your Local File — ensuring complete consistency, eliminating errors, and providing a coherent audit trail that links your TP documentation directly to your filed tax position.
Don't expose your UAE business to AED 20,000 penalties, FTA income adjustments, or loss of QFZP status. Our transfer pricing team reviews your intercompany transactions, prepares your documentation, and files your CT return with complete TP disclosure. Free consultation — no obligation.
Essence Accounting and Bookkeeping Co. L.L.C — FTA Approved Tax Agency, TAN 30006266 — Business Bay, Dubai
