Map related parties, reconcile controlled transactions to the accounts and prepare support for arm's-length pricing, Corporate Tax disclosures and transfer-pricing documentation.
The Federal Tax Authority states that UAE transfer pricing rules apply to transactions with Related Parties and Connected Persons whether the counterparty is in the mainland, a Free Zone or a foreign jurisdiction.
That means a Dubai business can have transfer-pricing obligations even when all of its related entities are within the UAE. The first step is identifying the relationships correctly, then matching the controlled transactions to the accounting records and the Corporate Tax return.
The purpose of the rules is to ensure that consideration for transactions with Related Parties and Connected Persons reflects terms comparable to those that would apply between independent parties.
The general ledger tells you who was paid or invoiced. It does not always tell you why the counterparty is related. A relationship map connects ownership, control and key individuals to the accounting data.
Sales, purchases and inventory transfers between related entities.
Management fees, shared services, technical support and other service charges.
Intercompany funding, interest, guarantees and other financing arrangements.
Royalties, licences and other charges connected with intellectual property.
Property rent, equipment use, asset sales and transfers within a controlled relationship.
Salary, fees, benefits, rent or other payments involving owners, directors, officers or their relevant related parties.
The FTA recognises five transfer-pricing methods. The appropriate method depends on the transaction, the functions performed, assets used, risks assumed and the availability of reliable comparable information.
| FTA-recognised method | Typical analytical focus |
|---|---|
| Comparable Uncontrolled Price | Compares the controlled price with a comparable independent price. |
| Resale Price | Starts from an independent resale price and analyses an appropriate resale margin. |
| Cost Plus | Applies an arm's-length mark-up to an appropriate cost base. |
| Transactional Net Margin | Compares a net profit indicator with comparable independent outcomes. |
| Transactional Profit Split | Allocates combined profit based on the parties' contributions where that method is appropriate. |
A transfer-pricing file is difficult to defend if the transaction list cannot be reconciled to the financial statements. The working papers need to show how transactions were identified, grouped and tied back to the accounting records.
Ministerial Decision No. 97 of 2023 sets thresholds for maintaining a Master File and Local File.
A Taxable Person can fall within those requirements where its revenue in the relevant Tax Period is AED 200 million or more, or where it is a Constituent Company of an MNE Group meeting the AED 3.15 billion consolidated group revenue threshold, subject to the detailed rules and exceptions.
The FTA Transfer Pricing Guide describes Local File information that can include the local entity, material controlled transactions, transfer-pricing method, functional analysis, agreements, financial information and schedules tying the transfer-pricing analysis to the annual financial accounts.
Business activities, management structure, strategy and the context in which the controlled transactions occur.
Economically significant functions, assets used or contributed and risks assumed by the parties.
Method selection, comparable information and the basis for the arm's-length result.
Schedules showing how the values used in the analysis tie to the annual financial accounts.
The FTA distinguishes Connected Persons from Related Parties. Connected Persons can include the owner of the business, a director or officer, or a Related Party of those persons.
Payments and benefits involving Connected Persons can require a separate review of the services or benefit received and the market-value basis.
Identify Related Parties, Connected Persons and relevant ownership/control relationships.
Pull controlled transactions and balances from the accounting records.
Group transactions by goods, services, finance, assets, IP or other category.
Review the arm's-length method and documentation required for the transaction.
Tie the final figures to the accounts and prepare disclosure inputs.
Related Party rules primarily deal with relationships created by ownership, control, family or other connections defined in the Corporate Tax Law. Connected Person rules focus on specified persons connected to the business, including an owner, director or officer and relevant related parties of those persons.
The classification matters because the supporting analysis and the way a payment is reviewed can differ. A group-company management fee is not the same type of issue as salary or rent paid to a business owner.
A UAE company pays a management fee to another company under common ownership. The transaction needs to be identified, reconciled and considered under the arm's-length principle.
A business pays salary, fees, rent or another benefit to its owner or director. The payment needs to be reviewed under the Connected Person provisions that apply to the facts.
| Situation | Documentation focus |
|---|---|
| Related-party transactions below Master/Local File thresholds | Maintain sufficient records to identify the parties, transactions, pricing basis and arm's-length support relevant to the Corporate Tax return. |
| Revenue at or above AED 200 million | Assess the Master File and Local File requirements under Ministerial Decision No. 97 of 2023. |
| Constituent company of qualifying MNE Group | Assess the AED 3.15 billion consolidated group-revenue threshold and the detailed file requirements. |
| Material service / financing transactions | Document agreement terms, functional analysis, pricing method and the financial values used. |
| Connected Person payments | Keep evidence of the role, service or benefit and the basis supporting market value where applicable. |
If a parent or sister company charges management or shared-service fees, the file should do more than contain an invoice. It should explain the service provided, the parties' responsibilities, the cost base or pricing approach, the benefit to the recipient and how the amount in the agreement ties to the ledger and Corporate Tax disclosure.
Finance identifies intercompany accounts but misses owners, directors, family relationships or newly incorporated group entities.
A recurring service or financing charge exists in the ledger without a document explaining the commercial terms.
The values prepared for tax disclosure cannot be tied back to the financial records.
The transfer-pricing method is selected during filing without being connected to how the transaction actually operates.
Payments to owners or directors are recorded but the role, service or market basis has not been documented.
The business does not check whether the Master File / Local File rules apply to the relevant Tax Period.
Yes. The FTA states that transfer pricing rules apply to transactions with Related Parties and Connected Persons whether they are in the UAE mainland, a Free Zone or a foreign jurisdiction.
It requires controlled transactions to be priced or valued as if they had been carried out between independent parties under comparable circumstances.
FTA guidance distinguishes Connected Persons from Related Parties. Connected Persons can include the owner of the business, a director or officer, or a Related Party of those persons.
The FTA lists the comparable uncontrolled price, resale price, cost-plus, transactional net margin and transactional profit split methods.
Ministerial Decision No. 97 of 2023 requires both for specified taxpayers, including where revenue in the relevant Tax Period is AED 200 million or more or where the taxpayer is part of an MNE Group meeting the AED 3.15 billion consolidated revenue threshold, subject to the detailed rules and exceptions.
No. Businesses need to maintain information on transactions with Related Parties and Connected Persons, and some taxpayers have additional Local File, Master File or other documentation requirements.
Yes. We can help identify payments to Connected Persons, reconcile them to the accounts and organise the facts needed for the applicable Corporate Tax analysis.
Share your group structure and related-party ledger. We can help map the relationships, reconcile the transactions and prepare the disclosure and documentation workstream.
