Transfer pricing stopped being a topic only large multinationals needed to think about the moment the UAE introduced Corporate Tax. Since then, any UAE business with related party or connected person transactions has been operating under a binding legal requirement to price those transactions at arm’s length, not a best practice recommendation, but a specific obligation written into the law itself.
What Are UAE Transfer Pricing Rules?
UAE transfer pricing rules are the legal requirements, introduced as part of UAE Corporate Tax Law, that govern how transactions between related parties and connected persons must be priced and documented. They require that such transactions reflect what independent parties would have agreed under comparable circumstances, and they set out the documentation, disclosure, and record-keeping obligations that support that requirement.
Legal Basis for UAE Transfer Pricing Rules
The foundation of UAE transfer pricing law is Article 34 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which embeds the arm’s length principle directly into UAE Corporate Tax Law. Article 34 requires that transactions and arrangements between Related Parties and between a taxable person and its Connected Persons be consistent with the results that would have been realized if the parties had not been related, and be conducted on arm’s length terms.
The Federal Tax Authority reinforced this legal foundation with a dedicated Transfer Pricing Guide, issued in October 2023, providing detailed guidance on how the arm’s length principle applies in the UAE context, including identifying Related Parties and Connected Persons, applying the recognized transfer pricing methods, and structuring documentation. The FTA’s Guide is broadly aligned with the OECD Transfer Pricing Guidelines, adapted to the UAE’s specific legal and administrative context.
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Who UAE Transfer Pricing Rules Apply To
UAE transfer pricing rules apply broadly, without a minimum transaction value below which compliance can be disregarded. They apply to mainland businesses transacting with related parties or connected persons, whether those transactions are domestic or cross-border, and to free zone businesses, including Qualifying Free Zone Persons, for whom transfer pricing compliance is one of the standing conditions required to maintain preferential tax treatment.
The rules also extend to transactions between a UAE head office and its foreign branches, and between UAE branches of a foreign entity and their head office, since these are treated as related party transactions in substance even though they involve a single legal entity. Small and medium-sized businesses are equally in scope wherever they carry out related party transactions, such as shareholder loans or intercompany management fees, though their documentation obligations generally scale down relative to larger taxpayers with more significant related party dealings.
Also check: Transfer Pricing Services UAE
Core Requirements Under UAE Transfer Pricing Rules
At the center of UAE transfer pricing rules is the requirement that related party and connected person transactions be priced consistently with the arm’s length principle, applying one of the internationally recognized transfer pricing methods and supported by comparability analysis. Beyond pricing itself, taxable persons with related party transactions are generally required to disclose relevant details as part of their Corporate Tax return, and, depending on the value and nature of their related party dealings, to maintain more extensive supporting documentation.
Documentation obligations under UAE rules scale in layers, from a disclosure form required for most taxpayers with related party transactions, up to a full Local File and, for larger multinational groups, a Master File and Country-by-Country Report. The specific thresholds and content requirements for each of these documents are covered in detail in our dedicated guide to transfer pricing documentation.
Read: Full Transfer Pricing Guide.
QFZP and Transfer Pricing Compliance
Transfer pricing compliance carries particular weight for Qualifying Free Zone Persons. Under Ministerial Decision No. 84 of 2025, audited financial statements are mandatory for all QFZPs regardless of revenue, and transfer pricing compliance, arm’s length pricing supported by proper documentation where thresholds are exceeded, is one of the standing conditions a Qualifying Free Zone Person must meet in every tax period to retain its preferential tax status. A breach of the transfer pricing condition can result in QFZP status being lost for the period of breach and the four subsequent tax periods, with all income taxed at standard Corporate Tax rates during that disqualification window.
Penalties for Non-Compliance
Non-compliance with UAE transfer pricing rules carries real financial consequences under the broader Corporate Tax penalty framework. Under Cabinet Decision No. 129 of 2025, late payment of tax attracts interest at 14 percent per annum, while late filing penalties rise from AED 500 per month to AED 1,000 per month the longer the failure continues. Beyond these general penalties, an incomplete or missing disclosure form, or a Local File or Master File that fails to meet the applicable requirements, can independently trigger closer FTA scrutiny and potential adjustment of a taxpayer’s reported income.
Record Keeping Requirements
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, this retention period is extended by a further 2 years under Cabinet Decision No. 17 of 2026, effective from April 2026. Businesses should treat these retention requirements as applying specifically to the intercompany agreements, benchmarking studies, and functional analysis that support their transfer pricing position, not only to the disclosure form itself.
How UAE Rules Relate to the OECD Framework
UAE transfer pricing rules did not develop in isolation. They follow the same broad structure used internationally, built around the OECD Transfer Pricing Guidelines, adapted to the UAE’s specific Corporate Tax legislation and administrative thresholds. A business already familiar with the OECD approach to transfer pricing, the arm’s length principle, the recognized methods, and the Local File and Master File documentation structure, will find the UAE’s framework closely follows that same logic, rather than introducing an entirely separate approach to learn from scratch.
Frequently Asked Questions (FAQs)
What law governs transfer pricing in the UAE?
Do UAE transfer pricing rules apply to domestic transactions?
Is there a minimum transaction value for UAE transfer pricing rules to apply?
How does transfer pricing affect Qualifying Free Zone Person status?
What are the penalties for transfer pricing non-compliance in the UAE?
Are UAE transfer pricing rules based on the OECD Guidelines?
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
UAE transfer pricing rules are one part of a complete transfer pricing framework. For a full walkthrough of related party transactions, pricing methods, and documentation requirements, see our complete transfer pricing guide.
Also check: Corporate Tax Services in UAE
Farahat & Co. helps UAE businesses meet their transfer pricing obligations under Corporate Tax Law, from arm’s length pricing through disclosure and documentation.
Contact Farahat & Co. today to discuss your transfer pricing requirements.
