Transfer pricing in the UAE: the arm's-length rule every related-party deal now follows
Under UAE Corporate Tax, transactions with related and connected persons must be priced at arm's length — as if between independents. Most small businesses won't hit the formal documentation thresholds, but every one of them still has to meet the arm's-length standard.
This article is general information, not tax advice. Regulations change — verify the current rules with the official sources below before acting.
Transfer pricing sounds like a multinational's problem. Under UAE Corporate Tax it isn't — the core rule reaches any business that transacts with its owner, its sister company, or a connected person. The paperwork is size-gated; the principle is not.
The arm's-length principle
Transactions with related parties and connected persons must be priced at arm's length — the price and terms two independent parties would have agreed. If you pay your own other company above-market rent, or your director draws value on non-commercial terms, the FTA can adjust the taxable income back to the arm's-length figure.
This is UAE law aligned to the OECD standard, so the concepts — comparables, functional analysis, arm's-length range — are the international ones.
Where the documentation thresholds sit
You must maintain a Master File and Local File only if either applies (Ministerial Decision 97 of 2023):
- you are a constituent entity of a multinational group with consolidated revenue at or above AED 3.15 billion, or
- your own revenue in the tax period is at or above AED 200 million.
Above those, the files must be produced within 30 days of an FTA request, and a transfer pricing disclosure form accompanies the return once related-party transactions pass certain levels.
What a small business actually has to do
Below the thresholds you won't prepare a formal Master/Local File — but you are not off the hook. You still have to be able to show that related-party prices were set at arm's length: a market rent reference, a rate card, a simple benchmark kept on file. The cheap insurance is to price intra-group and owner transactions commercially from the start, and keep a note of why the number is the number.
General information about UAE transfer pricing, current as of the review date above, and not tax advice. Confirm thresholds and documentation duties with the Federal Tax Authority or a licensed tax agent.
Frequently asked questions
Does transfer pricing apply to small UAE businesses?
The arm's-length principle applies to every taxable person's transactions with related or connected persons — there is no size exemption from the principle itself. What is size-gated is the formal documentation: a Master File and Local File are required only above the thresholds (broadly, being in a large multinational group, or having revenue of AED 200 million or more).
What documentation do I need to keep?
Above the thresholds you must maintain a Master File and Local File and produce them within 30 days of an FTA request; a transfer pricing disclosure form accompanies the return above certain related-party transaction levels. Below the thresholds, you still need enough evidence to show related-party prices were set at arm's length.