Tax & Compliance · Transfer Pricing

Transfer pricing in the UAE

If your company transacts with a related party, those transactions must be priced as if they were between independent parties — and you may have to document that you did. The rule applies whether the other party sits in the UAE mainland, a free zone, or abroad.

Ministerial Decision 97 of 2023, Art. 2Read off the MoF text, not a summaryBoth files, either limb

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Who this catches

Things founders do not think of as transactions at all

Most owners assume transfer pricing is a multinational problem. It is not. Under the Corporate Tax Law it applies to transactions with Related Parties and Connected Persons, and the FTA is explicit that it applies irrespective of whether they are in the UAE mainland, a free zone or a foreign jurisdiction.

Property you own personally Rented to your own company.

A loan from a shareholder Interest-free or otherwise.

Management fees Between two companies you own.

A salary to yourself or family Remuneration is a related-party transaction.

Goods from a partner's company Bought from a business your partner owns.

A free zone counterparty Different tax rate, so it lands in the local file.

What to know

When you must keep formal documentation

Ministerial Decision No. 97 of 2023, Article 2(1), requires a taxable person to maintain both a master file and a local file where either of the following is met: it is, at any time during the tax period, a constituent company of a multinational enterprises group with total consolidated group revenue of AED 3,150,000,000 or more; or its own revenue in the tax period is AED 200,000,000 or more.

These are alternatives, not tiers. A purely domestic UAE company that crosses AED 200m has to produce a master file as well as a local file — the master file is not reserved for multinationals. Almost every competing page states this the other way round, and it is the most consequential error in the sector's published material on the subject.

The local file is narrower than "every related party"Article 2(2) requires transactions with a non-resident person, an exempt person, a resident person that has elected small business relief, and a resident person whose income is taxed at a different corporate tax rate — which is how dealing with a qualifying free zone company at 0% pulls the transaction in.
And it leaves things outArticle 2(3) excludes other resident related parties, and excludes a natural person or an unincorporated-partnership partner where the parties genuinely act independently in the ordinary course of business and are not transacting exclusively with each other.
Below the thresholds you are not exempt from the rule — only from the paperworkThe arm's-length principle still applies to every related-party transaction, and the FTA can ask you to support the pricing you used. This is the distinction almost every competing page gets wrong.
Family-owned groups are the common caseA property held personally and rented to the company, a shareholder loan, a management charge between two entities with the same owner — none of these feel like transfer pricing, and all of them are.

At a glance

The essentials

Both files required if: Constituent of an MNE group with AED 3,150,000,000+ consolidated revenue
Or if: Your own revenue in the tax period is AED 200,000,000 or more
Which files: Master file AND local file — either limb triggers both
Below the thresholds: No documentation duty, but the arm's-length rule still applies
Scope of the rule: Mainland, free zone and foreign counterparties alike
Corporate tax rate: 0% for taxable income up to AED 375,000, 9% above it

Does this apply to you

Do you need to act?

The documentation threshold and the pricing rule are two different questions. Almost everyone has the second one.

✓

This applies to you if

You have any related-party transaction and profit near the tax thresholdThe pricing of those transactions moves where profit lands.
Your revenue is approaching AED 200,000,000Urgently. Local file preparation is not a month's work, and the master file comes with it.
You are part of a group above AED 3.15bn consolidated revenueBoth files, regardless of your own size.
You transact with a free zone entity at 0%A different rate on the other side puts the transaction into the local file.

It may not apply if

Your only related-party dealing is a shareholder loan on commercial termsAnd your profit sits below the threshold. "Less pressing" is not "ignore".
Your counterparties are all UAE residents taxed at the same rateArticle 2(3) leaves those out of the local file — though the pricing rule still applies.

FAQ

Common questions

Ask AgentBiz

Does an intra-group transaction at cost solve it?

No. Cost may not be arm's length. The test is what an independent party would have charged.

We are both UAE free zone companies — surely it does not matter?

It does. Domestic transactions are in scope, and free zone status makes it more sensitive, not less, because qualifying income conditions interact with it — and a different tax rate on one side puts the transaction into the local file.

We are a UAE-only group. Do we really need a master file?

Yes, once your revenue reaches AED 200,000,000. Article 2(1) requires both files where either limb is met, and the AED 200m limb has nothing to do with being multinational.

What if we have been doing it wrong?

Correcting a position is materially cheaper than having it found. Bring it forward.