The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
Are you prepared for the destructive shift in the UAE's business landscape? The introduction of Corporate Tax has ushered in a new era of fiscal responsibility, and at its heart lies a critical concept for all businesses: transfer pricing. A key first step in ensuring compliance is to understand the UAE transfer pricing threshold. These thresholds determine your specific reporting obligations and documentation requirements under the new law. This blog will break down these thresholds and explain exactly what they mean for businesses of all sizes, from local enterprises to large multinational corporations, helping you navigate this new terrain with confidence.
The Two-Tiered Threshold System
The UAE's transfer pricing framework operates on a two-tiered threshold system, each with distinct requirements. The Transfer Pricing Disclosure Form (TPDF) is required where the aggregate value of all related-party transactions exceeds AED 40,000,000; once that primary threshold is exceeded, any transaction category (goods, services, IP, interest, assets, liabilities, other) with an aggregate value over AED 4,000,000 must be itemised. Separately, a Connected-Person schedule is required where the aggregate payment or benefit to a single Connected Person (including its related parties) exceeds AED 500,000 - the TPDF (and any schedules) must be submitted with the corporate tax return in line with FTA filing timelines. The disclosure layer uses a two-step test: first the AED 40 million aggregate threshold, and if that is exceeded the taxpayer must disclose individual transaction categories where the aggregate per-category value exceeds AED 4 million.
Master File and Local File requirements apply where a Taxable Person’s revenue in the relevant Tax Period is AED 200,000,000 or more, or where the person is a Constituent Company of an MNE Group with consolidated global revenue of AED 3,150,000,000 or more; note the FTA provides an exception for UAE-headquartered groups with no foreign establishments (they may not need a Master File). The Master/Local documentation must be prepared contemporaneously and be producible to the FTA within 30 days of request (unless the FTA agrees an extension). It's crucial to remember that even if you don't meet these higher documentation thresholds, you must still adhere to the arm's length principle for all related-party and connected-person transactions, proving that their prices are fair and market-based.
What Happens If You Cross a Threshold?
Crossing a threshold triggers immediate and specific compliance actions. If the Disclosure Thresholds are met, the Transfer Pricing Disclosure Form must be completed and submitted together with the Corporate Tax return, which the FTA requires to be filed within 9 months from the end of the relevant Tax Period. This form provides the Federal Tax Authority (FTA) with key information on your related parties and the total value of your transactions with them. The FTA uses this data as a risk assessment tool to identify businesses that may be subject to further audit.
For the higher Documentation Thresholds, you must prepare and maintain a Master File and a Local File. The Master File is a high-level document that gives a global overview of the MNE group's business, while the Local File is specific to the UAE entity, providing a detailed functional analysis, financial data, and a benchmarking study to prove arm's length pricing. Failure to comply with the UAE’s TP and CT documentation rules can lead to monetary penalties, transfer-pricing adjustments by the FTA, and - depending on the facts - adverse consequences for Free Zone 0% eligibility (since Qualifying Free Zone Person status depends on meeting specified conditions). The precise penalty or consequence is fact-specific and governed by the Corporate Tax Law, Ministerial Decisions and FTA practice (penalty ranges and remedial processes are set out in FTA/Cabinet rules).
Reyson Badger: Your Partner in UAE Transfer Pricing Compliance
Understanding and consistently tracking the UAE transfer pricing threshold is fundamental for any business's tax strategy. Compliance is not merely about meeting filing deadlines but about consistently applying the arm's length principle to all your related-party dealings. By being proactive and prepared, you can mitigate risks and avoid costly penalties and disputes. For expert support in meeting complex requirements and maintaining compliance, trust Reyson Badger's specialists. Contact us today to schedule a consultation and ensure your business stays ahead of the curve.
