ANG ARABIA ACCOUNTING & TAX ADVISORY LLC
Transfer Pricing Solutions for UAE Businesses. Since UAE Corporate Tax took effect in June 2023, Transfer Pricing has become one of the most closely watched compliance areas.
The Federal Tax Authority (FTA) expects such transactions to be priced at arm’s length, backed by documentation — and its audit focus on this area is intensifying through 2026, with related-party pricing near the top of its risk-based audit priorities.
ANG Arabia’s Transfer Pricing team helps SMEs and growing groups across the UAE build practical, defensible positions — from risk assessment through policy design, benchmarking, and full documentation support.
Transfer Pricing rules govern how related entities price transactions between themselves: sale of goods, provision of services, financing, IP licensing, or management support. The framework was introduced under Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023, applying to tax periods starting on or after 1 June 2023.
The UAE’s approach is broadly based on the OECD Transfer Pricing Guidelines but casts a wider net than most jurisdictions.
It applies to domestic transactions as well as cross-border ones — including dealings between Free Zone entities.
Extends beyond related parties to owners, directors, and relatives within the fourth degree of kinship.
No minimum transaction value below which the arm’s length principle is waived.
FTA audit activity is intensifying, with related-party transactions treated as a priority risk area.
The burden of proof sits with the taxpayer — records must be ready to produce typically within 30 days.
Free Zone status does not exempt a business; weak documentation can put preferential 0% rates at risk.
Family-owned businesses are commonly caught by ‘connected person’ rules without formal multinational structures.
Shareholder payments or management fees can each trigger exposure regardless of company size.
| Area | UAE | India | Other major jurisdictions |
|---|---|---|---|
| Legal basis | Federal Decree-Law No. 47/2022 & Ministerial Decision No. 97/2023 — principles-based, OECD-aligned | Prescriptive rules under Sections 92-92F of the Income Tax Act | OECD Guidelines with local overlays (US, Germany, UK each add domestic rules) |
| Scope | Related parties AND ‘connected persons’ (kinship to 4th degree, owners, directors); domestic + cross-border | Mainly international transactions, plus ‘specified domestic transactions’ above a threshold | Typically cross-border focus; domestic scope varies by country |
| Key filings | TP Disclosure Form (above AED 40M); Master/Local File above AED 200M UAE or AED 3.15B group revenue | Form 3CEB (Accountant’s Report) mandatory for most dealings plus Master File/CbCR | US: Forms 5471/5472; Germany: new Transaction Matrix; UK: reforms under Finance Bill 2026 |
| Advance certainty | Unilateral APA programme only launched in 2025; bilateral/multilateral APAs to follow | APA programme established since 2012, including bilateral APAs | US APA programme running since 1991 |
| Penalty framework | No standalone TP penalty code — general Corporate Tax penalties apply | Dedicated TP penalty provisions on top of the income adjustment | US: Section 6662 penalties, with real litigation exposure |
The practical takeaway: pricing that is defensible in one jurisdiction is not automatically defensible in the other. Inconsistent positions are common triggers for dual scrutiny.
Non-compliance is dealt with under the general Corporate Tax penalty framework (Cabinet Decision No. 75 of 2023), and can include:
Taxable income increased to reflect arm’s length price, taxed at 9% Corporate Tax.
Non-arm’s length related-party payments can be denied as deductions outright.
Free Zone entities risk losing the 0% Qualifying Free Zone Person rate.
Adjustment creates a documented audit trail, increasing future scrutiny likelihood.
Assuming Free Zone or Qualifying Free Zone Person status removes the need for Transfer Pricing compliance — it doesn’t. Even with 0% tax, the documentation obligations remain absolute.
Treating domestic, UAE-to-UAE transactions as out of scope because they aren’t cross-border.
Overlooking shareholder payments, director remuneration, and relatives within the fourth degree.
Using group trademarks or software without charging or documenting a royalty.
Only covering salary costs without formally pricing or documenting the arrangement.
From initial risk assessment through to audit defense, we provide end-to-end support for your compliance journey.
Mapping related-party and connected-person exposure, flagging risk before it becomes an FTA query.
Building a consistent, defensible intercompany pricing policy for all transactions.
The foundation for selecting the right pricing method: Functional, Asset, and Risk analysis.
Testing pricing and profitability against comparable market data for total transparency.
Local File, Master File, TP Disclosure Form, and CbCR support for regulatory satisfaction.
Responding to FTA enquiries and pursuing relief through Mutual Agreement Procedures.
Trading and distribution, manufacturing, services, real estate, technology, financial services, and Free Zone or family-owned businesses — each with sector-specific pricing issues, from distributor margins and supply-chain cost allocation to IP licensing and financing arrangements.
Transfer Pricing compliance is no longer a formality — it is part of responsible business management in the UAE, with real financial and reputational consequences for getting it wrong.
