Transfer pricing rules define the prices charged between related parties for goods, services, loans, and intellectual property. Under UAE Corporate Tax Law and OECD standards, these transactions must satisfy the "arm's length" principle — priced as if negotiated between genuinely independent, unrelated parties. Most SME owners running more than one related entity have never heard of the rule, and that's exactly the exposure the FTA is now actively looking for.
Who This Actually Affects
Transfer pricing isn't a large-multinational-only concern. It applies to owners running multiple interconnected companies, UAE businesses transacting with an overseas parent, subsidiary, or affiliate, family business structures with related ownership across entities, businesses providing or receiving management services between related entities, and any structure with intercompany loans.
The Documentation Requirement
Businesses above the relevant thresholds must maintain a Transfer Pricing Local File — and in some cases a Master File — documenting the transactions, the parties involved, the pricing methodology, and the evidence supporting arm's length pricing. Under Ministerial Decision No. 97 of 2023 (as updated by Ministerial Decision No. 301 of 2025), the comprehensive Master File and Local File requirement applies to businesses with standalone revenue of AED 200 million or more, or that belong to a multinational group with global consolidated revenue of AED 3.15 billion or more. Below that, a simpler disclosure form threshold still applies: total related-party transactions exceeding AED 40 million in aggregate, or any single category — goods, services, financing, IP — exceeding AED 4 million. Documentation must exist before Corporate Tax filing, not assembled reactively after an FTA inquiry, and records must be retained for seven years.
The Most Common Errors
- Intercompany loans without interest — charging no interest, or below-market rates, on loans between related entities.
- Undervalued management fees — management or support services provided between related entities priced well below market rate, or not charged at all.
- Mispriced goods and services — significant deviations from market pricing on intercompany sales, with no documented justification.
- Free Zone profit shifting — structuring related-party transactions to concentrate profit in a zero-tax Free Zone entity, which is precisely the pattern the FTA is trained to identify.
A Real Pattern We See Often
A family manufacturing group running a mainland manufacturing entity and a Free Zone trading company had been selling goods from the manufacturing side to the trading side at cost price — no margin, no documentation. Through benchmarking analysis and proper transfer pricing documentation, the arrangement was restructured onto a defensible, arm's-length pricing basis, resolving the exposure before it became an FTA finding rather than after.