Insights
UAE Transfer Pricing Documentation: What Businesses Need to Maintain, and When
For businesses with a 31 December year end, the corporate tax return for 2025 is due on 30 September 2026 — next month. Filed with it is the related-party Disclosure Form: the schedule in which a business tells the Federal Tax Authority, in structured detail, who it transacted with inside its own group and on what terms.
This is the second filing cycle. That changes things. The FTA now has a prior year to compare against, and a disclosure that moves materially without explanation is exactly the kind of pattern a tax authority is built to notice.
Yet in our experience the most common failure here is not a wrong number. It is a business that concluded, reasonably but incorrectly, that transfer pricing was somebody else’s problem.
The distinction that decides everything
UAE transfer pricing has two separate layers, and conflating them is the source of most confusion.
The first is the arm’s length principle. Under Articles 34 to 36 of Federal Decree-Law No. 47 of 2022, every transaction with a Related Party or Connected Person must be priced as it would have been between independent parties. This applies to every taxable person. There is no revenue threshold, no small-business exemption, no free zone carve-out. A two-person consultancy paying its owner a management fee is inside this rule.
The second is documentation — the Disclosure Form, the Master File and the Local File. These do have thresholds, set by Ministerial Decision No. 97 of 2023, and most businesses fall below the larger ones.
The trap is treating the second as though it defines the first. Falling below the documentation thresholds does not exempt a business from pricing at arm’s length. It only means the FTA has not asked, in advance, to see the file. It can still ask.
Which obligations actually apply to you
The arm’s length rule applies to everyone. Only the paperwork scales with size.
The five thresholds, in order
Five numbers govern UAE transfer pricing compliance. They are frequently quoted together, which obscures the fact that they do two entirely different jobs: the lower three decide what you disclose on the return, the upper two decide what you keep on file.
Five thresholds, two different obligations
What each number actually triggers. Ordered by value, not drawn to scale.
The Local File trap most groups miss
If a business does cross the AED 200 million line, the next question is which transactions actually go into the Local File. Ministerial Decision 97 answers this in a way that is easy to read backwards.
Transactions that must be included are those with non-resident related parties, exempt persons, resident persons who have elected Small Business Relief, and — this is the one that catches groups — resident persons subject to a different corporate tax rate.
That last category means a mainland company transacting with its own Qualifying Free Zone Person affiliate, taxed at 0 per cent, must document that transaction in the Local File. The rate differential is precisely why the FTA wants to see it: value shifted from a 9 per cent entity to a 0 per cent entity within the same group is the textbook base erosion risk.
Transactions excluded from the Local File are, broadly, those with ordinary UAE residents taxed at the same rate, natural persons dealing genuinely independently, partners in an unincorporated partnership doing the same, and a permanent establishment of a non-resident taxed at the same rate.
A free zone entity is not outside transfer pricing. It is often the reason transfer pricing applies.
When each obligation actually bites
The three obligations sit at different points in time, and the second and third have no fixed date at all — which is exactly why they get deprioritised.
The compliance calendar for a 31 December year end
One fixed deadline, then an open-ended obligation that can be tested at any time.
The practical consequence is that documentation is the obligation most likely to be deferred, because nothing forces it on a date. A thirty-day production window is not enough time to build a Local File — to gather intercompany agreements, run a benchmarking study, and write a functional analysis. It is only enough time to hand over one that already exists.
What “maintain” actually requires
The word doing the work in the legislation is maintain. Three things follow from it.
1. Documentation should be contemporaneous
The file should reflect the analysis that supported the pricing when the pricing was set — not a justification assembled afterwards. A benchmarking study dated after an FTA query is materially weaker evidence than one dated before the transactions it covers.
2. Intercompany agreements must exist and match reality
The most common finding we see is not an aggressive margin. It is an intercompany arrangement with no written agreement at all, or an agreement whose terms bear little resemblance to what the two entities actually do. Where the conduct and the contract diverge, the conduct governs — and the contract becomes a liability rather than support.
3. The functional analysis has to be honest
Functions, assets and risks determine which entity is entitled to the return. A file that assigns significant risk to an entity with no people, no capital and no decision-making authority to bear it will not survive scrutiny, however carefully the margin was calculated.
Advance certainty is now available
One development worth noting. The FTA issued its Advance Pricing Agreement guide (CTGAPA1) on 31 December 2025, and began accepting applications for domestic unilateral APAs from 30 December 2025. An APA fixes an agreed transfer pricing methodology with the FTA for three to five tax periods.
A general materiality threshold of AED 100 million per tax period applies, and the application fee is AED 30,000, with AED 15,000 on renewal. Cross-border unilateral APAs are expected to follow, with a commencement date to be announced. For groups with a small number of large, recurring and genuinely contentious intercompany flows, this is the first route in the UAE to certainty in advance rather than argument in arrears.
Where businesses get this wrong
Assuming the thresholds are an exemption. They govern paperwork, not the arm’s length obligation. The FTA can question the pricing of a business that files no documentation at all.
Treating free zone status as a shield. A different tax rate inside the same group is a reason transfer pricing applies more closely, not less.
Leaving the Local File until it is requested. Thirty days is a production window, not a preparation window.
Disclosing inconsistently year to year. This is the second cycle. Movements between years invite questions, and the explanation is far easier to give while the working papers are still open.
The reasonable position
For most UAE businesses, proportionate is the right standard. A company with a handful of intercompany transactions does not need a full Local File. It does need a written policy, agreements that match conduct, and a note of how the pricing was arrived at — enough to answer a question without reconstructing a year’s trading from memory.
For groups above the thresholds, the work is larger but the principle identical: the file should already exist on the day it is asked for. That is the whole meaning of the word maintain.
Talk to a partner
LAKS Partners advises UAE businesses on transfer pricing across scope, documentation and defence — related party mapping, Disclosure Form review, Master and Local File preparation, benchmarking, intercompany agreements, and APA suitability.
Talk to a Partner
Chartered Accountant with more than 10 years of experience across audit, taxation, financial reporting and advisory. Specialises in Audit & Assurance, UAE Corporate Tax, VAT, IFRS reporting, internal controls and financial governance.
This article is provided for general information only and reflects the position as at August 2026. It does not constitute professional advice and should not be relied upon without specific consideration of your circumstances. Thresholds, deadlines and penalties are stated as published by the Ministry of Finance and the Federal Tax Authority; businesses should confirm the current position before acting.
