Document Your Related-Party Transactions For UAE Tax
We handle ongoing tax return filings and other regulatory submissions, keeping your company compliant with local laws.
Managing cross-border intercompany fees, lacking local benchmarking data, or preparing for mandatory disclosure forms on EmaraTax? KSB Consultancy provides end-to-end transfer pricing documentation and advisory services in Dubai.
Arm's Length Compliance For Related-Party Transactions
Transfer pricing rules govern how transactions between related parties and connected persons are priced and reported under UAE Corporate Tax Law. Under Federal Decree-Law No. 47 of 2022, all intercompany sales, management charges, intellectual property royalties, and financing arrangements must reflect the arm's length principle.
OECD-Aligned Methodologies
Implementing recognized pricing methods tailored to regional market conditions.
Full Documentation Delivery
Preparing disclosure forms, Local Files, Master Files, and benchmarking reports.
Audit Protection
Establishing robust intercompany documentation before the FTA conducts formal compliance reviews.
The UAE Legal Framework: Articles 34, 35, And 36
UAE transfer pricing obligations are embedded directly within the Corporate Tax Law:
Article 34 (The Arm's Length Principle)
Mandates that transactions between Related Parties and Connected Persons must match terms that would be agreed between independent enterprises in comparable circumstances.
Article 35 (Related Parties Defined)
Establishes relationship criteria based on ownership, control, or kinship. These definitions differ from standard IAS 24 accounting standards, requiring a specialized UAE tax assessment.
Article 36 (Connected Persons Framework)
Regulates transactions with individuals who own, control, or manage the business, including director remuneration, officer compensation, and owner benefits.
Mandatory Documentation & Threshold Requirements
Under Ministerial Decision No. 97 of 2023, specific revenue and group size thresholds determine documentation requirements:
Note: Entities claiming Small Business Relief (revenue equal to or below AED 3,000,000) are exempt from preparing Master and Local Files, though their transactions remain subject to the substantive arm's length principle.
| Transfer Pricing Requirement | Statutory Threshold & Scope | Key Content & Deliverables |
|---|---|---|
| Transfer Pricing Disclosure Form | Mandatory for all taxable persons engaging in related-party transactions, submitted alongside the annual Corporate Tax return. | Summary of intercompany transaction values, counterparty jurisdictions, and transfer pricing methods applied. |
| Local File | Required if annual revenue is AED 200,000,000 or more, OR if the entity is part of an MNE Group with consolidated revenue of AED 3.15 billion or more. | Detailed entity-level transactional analysis, economic comparability analysis, and financial reconciliations. |
| Master File | Required under the same thresholds as the Local File (AED 200M revenue or AED 3.15B MNE Group). | High-level global overview of the MNE group's business model, IP ownership, global supply chain, and financing structures. |
OECD Transfer Pricing Methodologies Applied
We apply the five standard OECD-recognized methodologies to establish defensible transfer pricing:
1. Comparable Uncontrolled Price (CUP) Method: Compares the price charged in a controlled transaction directly to prices charged between independent parties in comparable market transactions.
2. Transactional Net Margin Method (TNMM): Evaluates net profit margins relative to an appropriate base (costs, sales, or assets) against independent benchmark companies.
3. Cost Plus Method: Adds an appropriate arm's length gross mark-up to the direct and indirect costs incurred by the service supplier.
4. Resale Price Method: Evaluates the gross margin realized on reselling products purchased from a related party to independent customers.
5. Profit Split Method: Divides combined intercompany profits based on the economic value contributed by each participating entity.
Our Specialist Transfer Pricing Services
Related-Party Transaction Review
Mapping all intra-group financial flows, service charges, management fees, and intellectual property transfers.
Benchmarking Studies
Utilizing specialized financial databases to establish defensible arm's length margin ranges across the GCC and international markets.
Local & Master File Drafting
Compiling comprehensive documentation files matching FTA statutory guidelines.
Intercompany Agreement Alignment
Reviewing legal contracts between group entities to ensure commercial terms align with operational pricing practices.
Frequently asked questions
Are management fees paid to a parent company deductible?
Yes, provided the service delivers real commercial value, is priced at arm's length, and is supported by intercompany contracts, cost allocation schedules, and benchmark documentation.
What happens if the FTA rejects our intercompany pricing?
The FTA has statutory authority to adjust taxable income upward, disallow non-arm's-length expenses, impose additional tax assessments at 9%, and issue non-compliance penalties.
How are owner and director salaries regulated?
Under Article 36, payments to Connected Persons must reflect market value for services rendered. Excess compensation above arm's length rates is disallowed as a tax-deductible expense.