Arm's length, documented, disclosed
It is not a multinational-only problem. If you pay a management fee to your own other company, buy stock from a related supplier, or draw a salary above market for the role, you are inside these rules.
Transfer pricing arrived in the UAE with Corporate Tax, and it applies far more widely than businesses expect. It is not only a multinational concern: a UAE company that pays management fees to its owner's other company, buys stock from a related supplier abroad, or licenses a brand from a shareholder is inside the rules.
What the rules require
- Arm's length principle — transactions with related parties and connected persons must be priced as they would be between independent parties.
- Disclosure — a transfer pricing disclosure form is submitted with the Corporate Tax return where the prescribed conditions are met.
- Master File and Local File — required where the taxable person's revenue or its multinational group's consolidated revenue exceeds the prescribed thresholds, and must be provided to the FTA on request within the stated period.
- Connected persons — payments to owners, directors and their related parties are deductible only up to market value for services actually provided.
- Documentation regardless of size — even where formal Master and Local Files are not required, the arm's length nature of related-party transactions must be supportable.
Who this catches that does not expect it
| Arrangement | Why it is in scope |
|---|---|
| Management or head office fee to the owner's other company | Related party service transaction — needs benefit test and arm's length pricing |
| Stock purchased from a group company abroad | Controlled transaction — margin must be defensible |
| Brand or IP licensed from a shareholder | Royalty rate must be arm's length; also a reverse charge VAT item |
| Interest-free or soft loan from a shareholder | Financing transactions are within the rules |
| Owner's salary well above market for the role | Connected person rule limits deduction to market value |
| Free zone entity trading with a mainland affiliate | Central to whether QFZP conditions are met |
For a Qualifying Free Zone Person, compliance with the arm's length principle and transfer pricing documentation requirements is a condition of holding QFZP status. Getting related-party pricing wrong therefore risks more than an adjustment — it can put the 0% rate on all qualifying income at risk for the period.
What we do
Map your related-party transactions; test whether the thresholds for Master and Local File are met; benchmark and document the arm's length position for the material transactions; prepare the disclosure form for the return; and, where owner remuneration or intra-group charges look exposed, restructure the arrangement prospectively so the position is defensible rather than argued after the fact.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Transfer pricing — frequently asked questions
The arm's length principle applies to related-party and connected-person transactions regardless of size — what changes with size is the formal documentation burden. A small company paying a management fee to its owner's other entity is within the rules even though it will not need a Master File. It still needs to be able to explain why the fee is what it is, and the connected-person rule still limits the deduction to market value for services genuinely provided.
Where the prescribed revenue thresholds are met — broadly, where the taxable person's own revenue reaches the stated level, or where it is part of a multinational group whose consolidated revenue reaches the higher group threshold. They are not filed with the return but must be provided to the FTA on request within the period specified. Because assembling them properly takes time, businesses close to the thresholds should establish the position before a request arrives rather than after.
Yes, provided the services are genuinely provided, the recipient obtains a real benefit, and the charge is at arm's length. The three tests that fail in practice are benefit — no identifiable service was actually delivered; evidence — no contract, no deliverables, no time records; and pricing — a round-sum figure set to move profit rather than to reflect value. A fee that fails those tests is disallowed, and if it also affects a free zone entity's status the consequences are wider than the adjustment itself.
Want a straight answer on your position?
Tell us about the business — licence, size, systems and where things currently stand. We will tell you what you are obliged to do and what it costs to have it handled.
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