UAE corporate tax transfer pricing is the rule most owner-managed groups underestimate, because it does not switch on at a revenue threshold. From the first financial year that started on or after 1 June 2023, the UAE levies corporate tax at 9% on taxable income above AED 375,000 — and the moment two businesses under common ownership trade with each other, the price they use becomes a tax question. If a UAE company buys services from its Indian parent, lends to a sister entity or pays a shareholder-director, the arm’s length principle applies whether the group turns over AED 2 million or AED 2 billion.
What UAE corporate tax transfer pricing actually requires
The governing rule is Article 34 of Federal Decree-Law No. 47 of 2022. It states that transactions and arrangements between related parties must meet the arm’s length standard — the results must be consistent with what would have been realised had persons who were not related parties engaged in a similar transaction. In plain terms, you cannot use an intra-group price to shift profit to where it is taxed least; you must price as unrelated parties would. The law names five accepted methods to test this: the comparable uncontrolled price method, the resale price method, the cost-plus method, the transactional net margin method and the transactional profit split method. Where none of them reasonably applies, a taxable person may use another method that produces an arm’s length result — provided the choice can be defended.
Who counts as a related party
Article 35 draws the boundary wider than many owners expect. For individuals, related parties reach to the fourth degree of kinship or affiliation, including by adoption or guardianship. Between a natural person and a company, the two are related where the individual holds a 50% or greater ownership interest or otherwise controls the company. Two companies are related where one holds 50% or more of the other, or where a third person holds 50% or more of both. Control itself is defined to include the ability to exercise 50% or more of the voting rights. A person and its permanent establishment are related parties as well.
Payments to connected persons
Article 36 adds a separate test for connected persons — broadly, a company’s owners, its directors or officers, and the related parties of any of them. A payment or benefit to a connected person is deductible only to the extent it corresponds to the market value of what was actually provided. A shareholder-director’s salary, a management fee paid to an owner’s other company, rent paid to a related landlord: each must be justifiable as a market rate, or the excess is added back to taxable income.
The documentation that follows the transactions
The arm’s length rule is only half the obligation — you also have to be able to prove you met it. UAE corporate tax builds that proof in three layers, and which layers apply depends on the size of your group.
| Requirement | Who must prepare it | Trigger |
|---|---|---|
| Transfer pricing disclosure form | Any taxable person with related-party or connected-person transactions | Filed together with the annual corporate tax return |
| Master file and local file | Taxable persons that meet a size threshold | Revenue of AED 200 million or more in the tax period, or membership of an MNE group with consolidated revenue of AED 3.15 billion or more |
| Supporting documentation on request | Any taxable person | Provided to the Federal Tax Authority within the period it specifies |
The disclosure form travels with the return itself, summarising the value and nature of your related-party dealings. The master and local file — the detailed benchmarking study and the group-level picture — become mandatory only once you cross the AED 200 million revenue mark or sit inside a large multinational group; those thresholds come from Ministerial Decision No. 97 of 2023. But note what is not in that table: there is no exemption from the arm’s length principle. A small company below every documentation threshold still has to price its related-party transactions correctly and still completes the disclosure form.
Transfer pricing has no de minimis. Sitting under the AED 200 million documentation threshold spares you the master and local file — it does not spare you from pricing every intra-group transaction at arm’s length.
Why this reaches groups run from India
This is where cross-border families of companies get caught. An Indian promoter with a UAE trading arm, a US firm with a Dubai back office, a founder billing management fees between his own entities — each now has related-party transactions inside a UAE tax net that did not exist two years ago. The Federal Tax Authority can examine those prices and, where they do not reflect arm’s length outcomes, adjust the UAE company’s taxable income upward and tax the difference at 9%. The same transaction is often already scrutinised under India’s own transfer pricing regime, so the price has to stand up on both sides of the border at once. Getting it wrong is not merely a UAE problem — it is a double-taxation risk.
What to put in place now
Three steps make this manageable. First, map your related parties and connected persons using the Article 35 and 36 tests — list every entity and individual the definitions catch, not just the obvious subsidiaries. Second, inventory the transactions that flow between them: goods, services, loans, royalties, management charges, guarantees. Third, set and document a defensible arm’s length price for each, contemporaneously, so the disclosure form becomes a summary of work already done rather than a year-end scramble. If your group is likely to cross the AED 200 million line, commission the master and local file before the return is due, not after a query lands. Our UAE accounting and tax team and corporate tax specialists handle exactly this — from related-party mapping to benchmarking and the disclosure filing — for groups that operate across India, the US and the UAE. Related reading: how free zone companies keep their 0% rate and the small business relief before the 2026 sunset.