The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
Transfer pricing is the method companies use to set prices for goods, services, or assets exchanged between related parties, such as a parent company and its subsidiary, or two entities within the same business group. The UAE Corporate Tax framework (Federal Decree-Law No. 47 of 2022) came into effect for tax periods beginning on 1 June 2023; the FTA subsequently issued a Transfer Pricing Guide to explain the arm’s-length rules and documentation expectations.
These corporate tax transfer pricing rules UAE are designed to prevent profit shifting, ensure transparency, and align with global best practices set by the OECD. All controlled transactions must comply with the Arm’s Length Principle, but the obligation to prepare formal TP documentation (Master File / Local File / Transfer Pricing Disclosure) arises only where the FTA’s prescribed thresholds and conditions are met; exempt or small-business relief entities may not be required to prepare formal TP documentation despite being subject to the arm’s-length standard. Understanding and following the transfer pricing rules of the UAE corporate tax not only keeps companies compliant but also builds trust with tax authorities and safeguards against costly disputes or penalties.
The Arm’s Length Principle – The Core Rule
The Arm’s Length Principle is the backbone of the UAE’s transfer pricing regulations. It means that when two related parties, such as a parent company and its subsidiary, trade goods, services, or even share resources, the prices must be set as if they were completely independent businesses dealing with each other.
In other words, the terms and prices should be similar to what unrelated third parties would agree upon under the same circumstances. This ensures that profits are not artificially shifted to low-tax locations and that taxable income in the UAE reflects the true economic value of transactions.
Under UAE law, every transaction with related parties and connected persons must follow this rule. If prices are found to be inconsistent with the arm’s length standard, the Federal Tax Authority (FTA) has the right to adjust the company’s taxable income. This not only helps prevent tax avoidance but also promotes fairness, transparency, and trust in the corporate tax system.
Types of Transactions Covered
In the UAE, transfer pricing rules apply to a wide range of transactions between related parties or entities under common control. These include, but are not limited to:
- Sale or purchase of goods and services : This covers the exchange of products or services between group companies, whether within the UAE or across borders
- Intra-group financing arrangements : Such as loans, credit facilities, or even interest-free advances provided between related companies.
- Transfers of intangible assets : including intellectual property rights, patents, trademarks, brand names, copyrights, and other non-physical assets that hold significant value.\
- Management fees, royalties, and service charges : Payments for administrative, technical, or professional services, as well as licensing or usage rights for intellectual property, between group entities.
Conclusion
Transfer pricing in the UAE isn’t just a matter of filling out forms or ticking compliance checklists; it’s about proving that your business operates with fairness and integrity. By following the arm’s length principle, you show that every related-party transaction is priced as if it were with an independent third party, which keeps you in line with the law and ready for any audit.
With Reyson Badger by your side, you don’t have to navigate these rules alone. We turn complex transfer pricing requirements into clear, manageable steps, helping you document properly, avoid penalties, and protect your brand’s credibility. Our goal is to give you peace of mind so you can focus on growing your business while we handle the compliance.
