Dubai-based businesses must comply with UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) regarding transfer pricing, which mandates that transactions with related parties and connected persons follow the “arm’s length” principle. Key compliance requirements include submitting a Transfer Pricing Disclosure Form alongside the tax return, and maintaining Master and Local Files if revenue exceeds AED 200 million or if the group revenue exceeds AED 3.15 billion

Transfer pricing (TP) in Dubai requires that transactions between related parties or connected persons comply with the arm’s-length principle under UAE Corporate Tax Law. Companies must maintain documentation (Master File/Local File) if revenue exceeds AED 200 million or if part of a large multinational group (AED 3.15 billion+). 

A disclosure form is required if:

• Total transactions with related parties/connected persons exceed AED 40 million.

• Individual transaction categories (e.g., services, goods) exceed AED 4 million.

Key TP Requirements & Compliance:

• Arm’s Length Principle: All transactions (goods, services, loans, intellectual property) with related parties/connected persons must be priced as if they were with unrelated parties.
• Documentation Thresholds:
  • Master File and Local File: Required if the entity is part of an MNE group with consolidated group revenue greater than or equal to AED 3.15 billion.
  • Local File: Generally required for UAE entities with revenue exceeding AED 200 million.
• TP Disclosure Form: Required for all taxpayers with related-party transactions above a certain, yet-to-be-defined materiality threshold, though commonly applied to those exceeding an aggregate of AED 40 million, or individual categories over AED 4 million.
• Connected Persons: UAE Transfer Pricing Rules extend beyond traditional related parties to include owners, directors, and officers of the company, especially regarding remuneration.
• Penalties: Non-compliance can lead to penalties under the UAE Tax Procedures Law, including fines for late filing or failure to submit proper documentation. 

Methods and Documentation:

• TP Methods: The Federal Tax Authority (FTA) accepts OECD-aligned methods, including the Comparable Uncontrolled Price (CUP) method, Resale Price Method, Cost-Plus Method, and Transactional Net Margin Method (TNMM). Profit Split Method may also be adopted in specific cases, as per requirements.
• Documentation: Companies must maintain records justifying their pricing, which must be provided within 30 days if requested by the FTA. 

Important Considerations:

• Domestic Transactions: TP rules apply to both cross-border and domestic transactions.
• Monitoring: It is recommended to perform year-end TP adjustments to ensure compliance with the arm’s length standard.

Companies like Anbac Advisors help prepare robust documentation, to defend pricing policies, in accordance with UAE as well as OECD requirements of arms length pricing.

By,

Team AnBac