Transfer pricing used to be a topic multinationals discussed. UAE corporate tax brought it to every family group, holding structure and free zone–mainland arrangement in the country. The rules are simple to state and easy to trip over: related-party transactions must be priced as independent parties would have priced them — and you must be able to show how you did that.
Who counts as a related party?
Under UAE corporate tax, a related party includes:
- Entities under common control (typically 50% or more ownership, directly or indirectly)
- Permanent establishments of the same person
- Connected persons: founders, directors, and shareholders holding 5% or more, together with their relatives and controlled entities
The connected-person definition is the one that surprises family businesses most. A loan from a brother who holds shares in your company is a related-party transaction. Paying rent to a building owned by the founder's wife is a related-party transaction. Both are legal; both must be at arm's length and disclosed.
What you must file, by size
Transfer pricing disclosure form
Taxable persons with revenue of AED 40 million or more in a tax period — or those claiming exempt income, exempt qualifying free zone income, or tax relief that involves related-party amounts — must file a transfer pricing disclosure form with their corporate tax return. The form identifies the related-party transactions, the methods used, and whether documentation exists.
Master file and local file
Groups must prepare a master file and local file where either the UAE group revenue is AED 200 million or more, or the MNE group's consolidated revenue is at least AED 3.15 billion. These follow the OECD framework: economic analysis, comparability data, and a defence of the pricing chosen.
What everyone else should keep
Below the thresholds, there is no formal documentation mandate — but the substantive arm's length obligation still applies, and the burden of proof sits with the taxpayer. In practice, this means a written agreement, a pricing rationale, and support for the number you booked. A two-page file beats an empty folder in any review.
Five traps we see repeatedly
- Interest-free shareholder loans. An independent lender would charge interest. Without a benchmark or a documented justification, the authority may impute a taxable deemed benefit.
- Management fees with no service behind them. A charge needs evidence of a service delivered — invoices, deliverables, time records.
- Goods traded between related entities at cost. A trader earns a margin; selling at pure cost to a related party shifts profit without justification.
- Cost-sharing arrangements without a formula. If entities share overhead, the allocation key must be written down and applied consistently.
- Missing agreements. Several family-group companies operate on verbal understandings. In a review, verbal becomes disputed.
A practical starting file for SMEs
You do not need an OECD-style study to begin. Start with:
- A register listing every related party and connected person, with the relationship and shareholding
- A copy of each agreement governing intercompany flows — loans, services, goods, leases
- A one-page rationale per flow: what was charged, why that figure, what method you used
- Comparable data or internal benchmarks where available
- The disclosure form figures reconciled to your audited accounts
Transfer pricing penalties in the UAE can reach the higher of AED 50,000 and 5% of taxable income where documentation is not provided when required. The documentation is cheaper.
Why this belongs with your audit, not after it
Transfer pricing adjusts your profit — and your profit is what gets audited and taxed. Running the TP analysis after the accounts are signed means restating both. Running it before means your auditor tests it once and your return carries a defensible number.
Mano Prime Advisors prepares transfer pricing documentation, disclosure forms and supporting analyses for Dubai groups and free zone entities. Whether you are filing above the AED 40 million threshold or simply want a clean file for a family-group loan, start with a conversation.
