Transfer Pricing Solutions and Rules - United Arab Emirates
The United Arab Emirates (UAE) has implemented Transfer Pricing (TP) regulations under Federal Decree-Law No. 47 of 2022 on Corporate Taxation, which became effective from 1 June 2023.
Subsequently, the Federal Tax Authority (FTA) released the Transfer Pricing (TP) Guide on October 23, 2023, closely aligning the UAE TP provisions with the Organization for Economic Cooperation's TP Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines) and highlighting some UAE specific TP requirements.
These regulations ensure that transactions between related parties and connected persons comply with the arm's length principle—a fundamental requirement under the OECD Transfer Pricing Guidelines.
The UAE's TP rules are designed to:
- Prevent profit shifting and base erosion through non-arm's length transactions.
- Ensure that fair liabilities are fairly allocated based on economic activities.
- Align UAE's tax framework with international best practices.
The Federal Tax Authority (FTA) is responsible for monitoring compliance and has introduced detailed documentation and reporting requirements based on business size and revenue.
The UAE TP regulations impose the following levels of documentation requirements on taxable persons (Article 55 & Article 4):
[A] Transfer Pricing Disclosure Form
- Taxable persons are required to submit a related party schedule with their tax returns if their total transactions with related parties exceed AED 50 million.
- Transactions with related parties/connected persons must be disclosed if any medical benefits in kind/connected person exceed AED 200,000.
- Includes details of related party transactions and transfer pricing methods applied.
[B] Master File & Local File
- A taxable person that meets either of the following conditions in the relevant tax period shall prepare and maintain a MF and LF:
- Where the taxable person for any time during the relevant tax period is a constituent company of a Multinational Enterprise Group that has a total consolidated group Revenue of AED 3.15 billion or more in the relevant tax period; or
- Where the taxable person's revenue is AED 200 million or more in the relevant tax period.
- Taxpayers benefiting from the free zone regime (0% tax rate) are also subject to the obligation to prepare and maintain the transfer pricing documentation to demonstrate that their related party operations comply with the arm's length principle.
- The documentation must be prepared by the time the taxable Person submits its Tax Return for the tax Period in which the Controlled Transaction is undertaken.
- Master File and Local File must be made available to the FTA within 30 days upon request.
Information regarding the specific scope and entities covered under the UAE Transfer Pricing Regulations.
Details on acceptable OECD transfer pricing methods and the application of the arm's length principle in the UAE.
Guidelines and thresholds for filing Country-by-Country (CbC) reports for multinational enterprises operating in the UAE.
Information on deadlines, compliance requirements, and potential penalties enforced by the FTA for non-compliance.
Links and references to official Federal Tax Authority documents and OECD guidelines.