Applying the arm’s length principle correctly is only half the compliance picture. The other half is being able to prove it. Transfer pricing documentation is the evidence a business maintains to demonstrate that its related party pricing reflects what independent parties would have agreed to, and under UAE Corporate Tax Law, that evidence is not optional paperwork, it is a direct legal obligation tied to the value and structure of a taxpayer’s related party dealings.
What Is Transfer Pricing Documentation?
Transfer pricing documentation is the structured record a business keeps to support the pricing of its related party and connected person transactions. It typically includes a description of the group’s business and organizational structure, an analysis of the functions, assets, and risks involved in each related party transaction, the transfer pricing method applied, and the comparable data or benchmarking evidence used to support the pricing.
The purpose is straightforward: if a tax authority questions a related party price, documentation is what allows a business to show its reasoning, rather than trying to reconstruct an explanation after the fact. Under Article 34 of Federal Decree-Law No. 47 of 2022 and the Federal Tax Authority’s Transfer Pricing Guide, transfer pricing documentation requirements scale with the size and complexity of a taxpayer’s related party transactions, meaning not every business faces the same documentation burden.
Master File
The Master File is a high-level document that provides an overview of a multinational group’s global operations as a whole, rather than focusing on any single entity’s transactions in isolation. It typically covers the group’s organizational structure, a description of its business activities, its intangible assets, its intercompany financing arrangements, and its overall transfer pricing policies.
A Master File is generally required where a UAE taxpayer belongs to a multinational group whose consolidated revenue exceeds AED 3.15 billion, aligning with the OECD’s standard Master File threshold. Because it is prepared at the group level, a single Master File can typically be shared across every entity within the group that meets the threshold, rather than being produced separately for each UAE subsidiary or branch.
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Local File
The Local File sits at the opposite end of the scale from the Master File: detailed, transaction-specific, and focused entirely on the UAE taxpayer’s own related party dealings rather than the group as a whole. It includes a functional analysis of the local entity, the transfer pricing method selected for each material related party transaction, and the benchmarking data used to support the pricing applied.
Under Ministerial Decision No. 97 of 2023, a Local File is generally required where a taxpayer’s aggregate related party transactions exceed AED 4 million within a tax period. Because this threshold is measured against transaction value rather than overall group size, a comparatively smaller UAE business with significant intercompany dealings can still fall within the Local File requirement, even where a Master File obligation does not apply.
Country-by-Country Report
The Country-by-Country Report, often referred to as CbCR, is a standardized report that shows how a multinational group’s income, taxes paid, and other key economic indicators are distributed across every jurisdiction in which it operates. It gives tax authorities a global picture of where a group’s profit, employees, and assets actually sit, which helps identify where reported profit allocation may not match the underlying business activity.
CbCR obligations generally apply to UAE-resident ultimate parent entities of multinational groups with consolidated revenue exceeding AED 3.15 billion, consistent with the OECD’s Base Erosion and Profit Shifting framework. Unlike the Master File and Local File, which support a taxpayer’s own transfer pricing position, CbCR is primarily a transparency and risk-assessment tool used by tax authorities rather than a defense document prepared for a specific audit.
Transfer Pricing Documentation Requirements
UAE transfer pricing documentation requirements are structured in layers, so that the documentation obligation a business faces depends on where it sits against the relevant thresholds. At the most basic level, businesses with related party transactions are generally required to complete a disclosure form as part of their Corporate Tax return, summarizing the nature and value of their related party and connected person dealings for the period.
Beyond the disclosure form, businesses that exceed the AED 4 million related party transaction threshold face the Local File requirement, and those belonging to sufficiently large multinational groups face the Master File and, where applicable, CbCR requirements on top of it. A business does not need to prepare every layer of documentation regardless of size. The requirement is proportionate: a smaller UAE company with limited related party dealings may only need the disclosure form, while a large multinational group with significant intercompany transactions faces the full stack.
Information and Records to Maintain
Beyond the Master File, Local File, and CbCR themselves, businesses are expected to retain a broader set of supporting records that back up the analysis contained in those documents. This includes signed intercompany agreements setting out the terms of each related party arrangement in writing, the economic and comparability analysis used to justify the transfer pricing method selected, and evidence of the benchmarking data or comparable transactions relied upon.
Corporate Tax records, including transfer pricing documentation, must generally be retained for 7 years from the end of the relevant tax period. Where a tax refund request is pending, that retention period is extended by a further 2 years under Cabinet Decision No. 17 of 2026, effective from April 2026. Maintaining these records contemporaneously, prepared alongside the transactions themselves rather than reconstructed later, carries far more weight if a tax authority ever reviews the position.
Also check: Transfer Pricing Services UAE
When Documentation Is Required
Transfer pricing documentation should be prepared and kept current on an ongoing basis, not assembled only once a tax authority requests it. In practice, this means reviewing a group’s related party transactions, and refreshing the underlying benchmarking data, at least annually, since business circumstances, market conditions, and comparable data all shift over time.
Documentation becomes especially important at specific points: when a business first crosses the AED 4 million related party transaction threshold and becomes subject to the Local File requirement, when a group restructures in a way that changes which entities are related, or when a business is notified of an FTA review or audit and needs to produce its supporting evidence within the timeframe requested. Waiting until any of these moments to start preparing documentation from scratch is one of the most common and avoidable transfer pricing risks a business can face.
Frequently Asked Questions (FAQs)
What is transfer pricing documentation?
Who needs to prepare transfer pricing documentation in the UAE?
What is the difference between a Master File and a Local File?
How long must transfer pricing records be kept in the UAE?
Is a disclosure form always required for related party transactions?
How often should transfer pricing documentation be updated?
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Transfer pricing documentation is one part of a complete compliance framework. For a full walkthrough of related party transactions, pricing methods, and UAE compliance requirements, see our complete transfer pricing guide.
Farahat & Co. helps UAE businesses prepare disclosure forms, Local Files, and Master Files, supported by benchmarking and functional analysis aligned with UAE Corporate Tax Law.
Contact Farahat & Co. today to discuss your transfer pricing requirements.
