Transfer Pricing UAE 2026: Master File, Local File & Disclosure

Transfer pricing is the rule most UAE owners did not know they had until Corporate Tax arrived. If your company buys from, sells to, lends to, or pays a company or person it is connected with, those prices now have to stand up to scrutiny. It is not an exotic concern for multinationals only – a Dubai trading company that pays its owner a management fee, or buys stock from a sister entity abroad, is already in scope.

This guide explains the arm’s length principle, who must document what, and how to keep your intra-group pricing defensible. It has been reviewed by Jashvantkumar Prajapati of Avyanco Group. For the wider tax picture, start with our UAE tax and compliance overview and Corporate Tax guide.

The mistake I see most is owners treating intra-group prices as an internal matter. They are not. The day the FTA asks, the question is not what you charged – it is whether you can prove an unrelated party would have paid the same.

— Jashvantkumar Prajapati, Business Structuring Specialist, Avyanco Group (reviewer)

What transfer pricing is, and the law behind it

Transfer pricing governs the prices charged in transactions between related parties – companies or people connected by ownership or control. UAE Corporate Tax adopts the arm’s length principle under Article 34 of Federal Decree-Law No. 47 of 2022: those prices must match what independent, unconnected parties would have agreed. The documentation requirements sit in Ministerial Decision No. 97 of 2023. The framework follows the OECD Transfer Pricing Guidelines, so the methods and logic will be familiar to anyone who has dealt with TP elsewhere.

Who has to document what

This is the part owners get wrong. The obligations come in three layers, and only the top layer has a size threshold:

A standalone UAE business that crosses AED 200 million prepares the Local File; the Master File only applies if the group spans more than one country. Below AED 200 million, you still price at arm’s length and still file the Related Party Disclosure – you just are not required to hold the full files.

Related parties and connected persons

Two categories are caught. Related parties are entities or individuals linked by ownership or control – parent and subsidiary, sister companies, or a person holding broadly 50% or more. Connected persons are those who can influence the business: owners, directors, and their relatives. Payments to connected persons – owner salaries, management fees, rent paid to a shareholder – are a common audit focus, because they are an easy route to strip profit. They must be at market rates and serve the business.

The arm's length methods

You choose the most appropriate method for each transaction and document why it fits. The recognised methods are:

• Comparable Uncontrolled Price (CUP) – compare against the price in an equivalent third-party deal
• Resale Price – work back from the onward sale price less a market margin
• Cost Plus – add a market mark-up to the supplier’s costs
• Transactional Net Margin (TNMM) – compare net profit margins against independent companies
• Profit Split – divide combined profit as unrelated parties would

The method matters less than the evidence behind it. A position supported by benchmarking against real independent companies is what turns a number into a defensible one.

How to stay compliant, step by step

Processing and review timelines are indicative. Documentation expectations are set by the FTA under Ministerial Decision No. 97 of 2023 and may be revised.

What it costs to get right

There is no government fee for transfer pricing – the cost is professional. A Related Party Disclosure for a straightforward company is modest; a full Local File with benchmarking is a larger engagement priced to the number and complexity of transactions. Set against an FTA adjustment plus penalties on mispriced intra-group flows, documentation is almost always the cheaper side of the equation. For where TP sits in your overall obligations, see our FTA registration guide.

Five transfer pricing mistakes to avoid

1. Assuming you are too small to be in scope. The arm’s length rule has no size exemption – only the full files do.
2. Ignoring connected-person payments. Owner salaries, management fees and shareholder rent are prime audit targets.
3. Leaving documentation until the FTA asks. It must be contemporaneous; 30 days is not enough to build it from nothing.
4. Picking a method with no benchmarking. An unsupported method is a number, not a defence.
5. Letting the disclosure contradict the accounts. The Related Party Disclosure must reconcile with your financial statements.

Frequently asked questions

Does transfer pricing apply to small UAE businesses?

The arm's length principle applies to every UAE company that transacts with related parties or connected persons - there is no size exemption from the rule itself. What scales with size is the documentation. Every taxpayer with related-party dealings files a Related Party Disclosure with its Corporate Tax return. Only those crossing the thresholds also prepare a Local File and Master File. So a small family company still has to price intra-group transactions fairly, even if it never has to file a full TP report.

What is the arm's length principle in simple terms?

It means transactions between related parties must be priced as if they were between independent, unconnected businesses. If you sell goods to your own sister company, the price must be what an unrelated customer would pay. The principle, set out in Article 34 of Federal Decree-Law No. 47 of 2022, stops groups from shifting profit to where it is taxed least by using artificial internal prices.

When do I need a Local File and Master File in the UAE?

Under Ministerial Decision No. 97 of 2023 you must maintain both a Local File and a Master File if your revenue is AED 200 million or more in the tax period, or if you are part of a multinational group with consolidated revenue of AED 3.15 billion or more. A standalone UAE business that only crosses the AED 200 million mark prepares the Local File; the Master File is for groups operating across more than one country.

What is the Related Party Disclosure form?

It is a schedule submitted with your annual Corporate Tax return that discloses transactions with related parties and connected persons - the amounts, the parties, and the pricing method. Unlike the Local and Master Files, it has no revenue threshold: any taxpayer with material related-party dealings completes it. It is the FTA's first window into your intra-group pricing, so it should reconcile with your accounts.

Who counts as a related party or connected person?

A related party is broadly an individual or entity linked by ownership or control - parent and subsidiary companies, sister companies, and individuals with significant ownership, typically 50% or more, or control. A connected person is someone able to influence the business, such as an owner, director, or their relatives, and includes payments like owner remuneration. Both categories must be priced at arm's length.

How long do I have to produce TP documentation if the FTA asks?

The Local File and Master File must be submitted within 30 days of a formal request from the Federal Tax Authority. Crucially, the rules expect the documentation to be contemporaneous - it should already exist at the time the transactions take place, not be assembled after a request lands. Thirty days is not enough time to build a defensible TP study from scratch, which is the practical reason to prepare it during the year.

What happens if my related-party pricing is wrong?

If the FTA finds your intra-group prices are not at arm's length, it can adjust your taxable income upward and apply Corporate Tax on the difference, plus administrative penalties for the adjustment and for missing or inadequate documentation. The financial exposure is rarely the original tax alone - it is the tax, the penalty, and the time spent defending a position that proper documentation would have settled in advance.

Can I use OECD transfer pricing methods in the UAE?

Yes. The UAE framework is built on the internationally recognised arm's length methods - comparable uncontrolled price, resale price, cost plus, transactional net margin, and profit split - consistent with the OECD Transfer Pricing Guidelines. You select the most appropriate method for each type of transaction and document why. Using a recognised method, applied consistently and supported by benchmarking, is what makes a position defensible.

Sources and official references

Related guides

• UAE tax and compliance overview
• UAE Corporate Tax
• UAE tax optimization
• Corporate secretarial and UBO
• Free UAE cost calculator
• Talk to an adviser

This guide is general information, not legal or tax advice. UAE tax law, thresholds, fees and penalties change without notice. Confirm the current position with the Federal Tax Authority (tax.gov.ae) or the Ministry of Finance (mof.gov.ae), or a licensed tax adviser, before you act.