For multinational groups and related party businesses operating in UAE, transfer pricing documentation is a critical compliance requirement under the UAE Corporate Tax Law. With the adopting OECD aligned transfer pricing rules, businesses are expected to justify intercompany pricing with clear economic evidence.
Proper transfer pricing documentation helps businesses remain compliant, reduce audit exposure, and manage tax risks effectively. It also plays a key role during tax audits and regulatory assessments conducted by the Federal Tax Authority.
Growing Importance Of Transfer Pricing In UAE
Transfer pricing has become a major focus area for tax authorities globally, including the UAE. The objective is to prevent multinational enterprises from shifting profits to low tax jurisdictions through non arm’s length pricing.
Tax authorities conduct transfer pricing reviews to examine transactions between associated enterprises, commonly known as related party transactions. These transactions include goods supply, service arrangements, management fees, royalties, cost allocations, and intercompany financing.
Transfer pricing documentation is a formal record maintained by multinational groups to support how transfer prices are determined between related entities operating across different jurisdictions. Its primary purpose is to demonstrate compliance with the arm’s length principle, ensuring transactions reflect fair market value.
Why UAE Businesses Must Maintain Transfer Pricing Documentation
Maintaining transfer pricing documentation delivers both regulatory and strategic benefits for businesses.
Compliance With UAE Corporate Tax Law
The UAE Corporate Tax Law mandates that related party transactions must comply with the arm’s length standard as per OECD guidelines. Proper documentation ensures regulatory compliance and reduces penalty exposure.
Reduction Of Tax Disputes
Clear documentation minimizes discrepancies in intercompany pricing, reducing the likelihood of tax adjustments, disputes, and prolonged audit proceedings.
Stronger Risk Management
Maintaining accurate transfer pricing records provides a structured approach to identifying and managing transfer pricing risks across business operations.
Better Strategic And Financial Planning
Transfer pricing documentation offers insights into profit allocation, cost efficiency, and value creation, supporting informed business decisions.
Demonstrating Arm’s Length Pricing
Documentation confirms that related party transactions are priced consistently with market conditions and independent party behavior.
Transparency With Tax Authorities
Proactive disclosure enhances credibility and builds smoother relationships with UAE tax authorities.
Alignment With International Tax Frameworks
Consistent documentation supports compliance with OECD Transfer Pricing Guidelines and global BEPS standards.
Core Transfer Pricing Documentation Requirements In UAE
UAE group companies are required to maintain detailed records of intercompany transactions across jurisdictions. The key documentation requirements include the following.
Master File And Local File
A taxable person must prepare and maintain a Master File and Local File if any of the following thresholds are met:
- The taxable person belongs to a multinational enterprise group with consolidated revenue of AED 3.15 billion or more
- The taxable person’s revenue is AED 200 million or more during the relevant tax period
UAE headquartered groups with no foreign establishments are exempt from maintaining a Master File. The Master File outlines the global group structure, business activities, and transfer pricing policies, while the Local File documents specific related party transactions.
Related Party Disclosure Form
If the total value of related party transactions recorded in financial statements or calculated at market value reaches AED 40 million, the taxpayer must submit a Related Party Disclosure Form with the corporate tax return.
Individual transaction reporting is required when a transaction exceeds AED 4 million and the overall AED 40 million threshold is met.
Connected Person Disclosure Form
Payments or benefits provided to connected persons aggregating to AED 500,000 or more must be disclosed. These transactions are assessed from corporate tax, transfer pricing, and remuneration perspectives based on the arm’s length principle.
Country By Country Reporting
Country by Country Reporting applies to multinational enterprise groups headquartered in UAE with consolidated revenue of AED 3.15 billion or more in the preceding fiscal year.
CbCR provides tax authorities with visibility into global income allocation, taxes paid, and economic activities across jurisdictions.
Best Practices For Transfer Pricing Compliance In UAE
Businesses should adopt a proactive compliance approach by updating transfer pricing documentation annually, conducting regular benchmarking studies, and ensuring alignment between documentation and actual business operations.
Engaging professional advisors for transfer pricing documentation in UAE helps ensure accuracy, audit readiness, and regulatory alignment.
How Dos Hermanos Supports UAE Businesses
Dos Hermanos assists multinational and UAE based businesses in meeting transfer pricing compliance requirements with confidence.
Structuring Intercompany Transactions
We support businesses by drafting and reviewing intercompany agreements that reflect commercial reality and ensure consistency across group entities.
Expertise In UAE And OECD Regulations
Our professionals possess in-depth knowledge of UAE Corporate Tax Law, OECD Transfer Pricing Guidelines, and international tax standards.
Benchmarking And Comparability Analysis
We perform detailed benchmarking analysis using reliable financial databases to support arm’s length pricing.
End To End Transfer Pricing Documentation
Dos Hermanos prepares Master Files, Local Files, disclosure forms, and Country by Country Reports in line with UAE regulations.
Ongoing Compliance And Audit Support
We provide continuous advisory support to help businesses stay compliant as regulations evolve.
FAQs
What is transfer pricing documentation in UAE?
It is a set of records proving that related party transactions comply with the arm’s length principle under Corporate Tax law.
Is transfer pricing documentation mandatory in UAE?
Yes, for businesses meeting the revenue or transaction thresholds specified under Corporate Tax regulations.
What are the penalties for non compliance?
Failure to maintain documentation may result in penalties, income adjustments, and increased audit scrutiny.
Do free zone entities need transfer pricing documentation?
Yes, free zone companies with related party transactions must comply with transfer pricing rules.
How often should transfer pricing documentation be updated?
Transfer pricing documentation should be reviewed and updated annually.
Conclusion
Maintaining proper transfer pricing documentation is essential for UAE businesses to comply with UAE Corporate Tax Law and OECD guidelines. It ensures arm’s length pricing, reduces audit risks, minimizes tax disputes, and provides insights for strategic financial planning.
For companies in Dubai and across the UAE, working with experts like Dos Hermanos helps structure intercompany transactions, prepare Master Files, Local Files, and disclosure forms, and stay fully compliant. Investing in proper documentation is both a regulatory requirement and a strategic advantage.
Compliance Support: We ensure full compliance with UAE transfer pricing regulations and OECD guidelines. Contact Dos Hermanos to secure your business and streamline intercompany transactions.
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