Benchmarking Analysis Services in UAE
Registered Tax Agent Regulated by the FTA (Federal Tax Authority)
Benchmarking analysis provides the objective, market-based evidence needed to demonstrate that related-party transactions are priced at arm’s length under the UAE Corporate Tax framework. Farahat & Co. provides structured benchmarking analysis services for management fees, service charges, royalties, intercompany loans, cost allocations, connected person payments, and other controlled arrangements — supporting transfer pricing documentation and FTA compliance requirements.
Our Benchmarking Analysis Process
Our benchmarking work follows a structured methodology aligned with OECD guidelines and UAE transfer pricing requirements. Each engagement covers:
Transaction Review: We analyse related-party and connected-person transactions to identify the nature of the arrangements, assess potential pricing risks, and determine the appropriate scope of the benchmarking study.
Method Selection: Based on the transaction profile and the functional and risk positions of the parties involved, we select the most appropriate transfer pricing method — such as TNMM, CUP, Cost Plus, Resale Price, or Profit Split.
Comparable Data Analysis: We conduct a structured search of recognised commercial databases, applying defined screening criteria and financial filters to identify comparable companies or transactions that support the arm’s length analysis.
Arm’s Length Range Calculation: We determine and interpret the arm’s length range for the controlled transaction — providing a defensible, evidence-based pricing position that can withstand FTA review.
Benchmarking Report: We prepare a structured benchmarking report documenting the methodology, comparable data, analysis, and conclusions — ready for inclusion in the transfer pricing local file and available for submission in the event of an FTA review.
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What is Benchmarking Analysis?
Benchmarking analysis is the process of assessing whether transactions between related parties or connected persons are priced on an arm’s length basis. It compares controlled transactions against comparable independent transactions or companies to determine whether the pricing reflects what unrelated parties would agree to under similar circumstances.
A properly prepared benchmarking analysis supports transfer pricing documentation by providing reliable, market-based evidence that controlled transactions meet the arm’s length standard required under UAE Corporate Tax Law.
Benchmarking analysis is commonly used to support a wide range of related-party arrangements, including management fees, service charges, royalties, intercompany loans, financing arrangements, and cost allocations.
Why Benchmarking Analysis Matters Under UAE Corporate Tax
Without proper benchmarking support, a business may struggle to justify its related-party pricing during an FTA review or tax audit. The Federal Tax Authority has the authority to review controlled transactions and make transfer pricing adjustments where pricing is not considered arm’s length — increasing the taxable income of the business and potentially triggering penalties.
Benchmarking analysis addresses this risk by providing objective, market-based evidence that the pricing of related-party transactions is commercially supportable and meets the arm’s length standard required under UAE Corporate Tax Law. Specifically, it helps businesses:
- Defend their pricing position during FTA reviews and tax audits
- Reduce the risk of transfer pricing adjustments that increase taxable income
- Strengthen transfer pricing documentation with reliable comparable data
- Demonstrate compliance with UAE transfer pricing obligations
- Avoid penalties arising from insufficient or unsupported documentation
Beyond regulatory compliance, benchmarking analysis also gives management a clearer view of whether group pricing policies are commercially reasonable, consistent across entities, and properly aligned with the economic substance of each transaction.
Who Needs Benchmarking Analysis?
Benchmarking analysis is relevant for UAE businesses that engage in controlled transactions with related parties or connected persons. This is especially important where the pricing of goods, services, financing, royalties, or intangible assets must be justified under the arm’s length principle.
Benchmarking may be required for:
- Companies dealing with group entities for goods, services, or financing.
- Businesses with UAE entities that transact with foreign group companies.
- Businesses paying or receiving management fees, royalties, or shared service costs.
- Entities involved in intercompany loans or financial arrangements.
- Companies with cost-sharing or expense allocation structures.
- Businesses preparing transfer pricing documentation under UAE Corporate Tax.
- Groups reviewing whether existing related party pricing policies are commercially defensible.
When Should a Business Prepare Benchmarking Analysis?
Benchmarking analysis may be required when a business needs to support the pricing of related party or connected person transactions. It is commonly prepared as part of transfer pricing documentation or when a company wants to review its tax risk before filing or during an internal compliance review.
Benchmarking is usually relevant in the following situations:
- Preparing transfer pricing documentation.
- Reviewing existing related party pricing policies.
- Introducing new intercompany charges or service arrangements.
- Supporting management fees, royalties, loans, or cost allocations.
- Before year-end closing where related party pricing may affect taxable income.
- Responding to FTA queries, reviews, or tax audits.
- Conducting internal tax risk assessments.
Benchmarking Process for Transfer Pricing
The benchmarking process follows a structured approach to ensure that the analysis is reliable, consistent, and aligned with the nature of the controlled transaction.
Step 1: Identify Controlled Transactions
The first step is to identify and review transactions between related parties and connected persons. This includes understanding the nature, value, terms, and pricing of each transaction.
Step 2: Conduct Functional and Risk Analysis
A functional and risk analysis is carried out to assess the functions performed, assets used, and risks assumed by each party involved in the transaction.
Step 3: Select the Most Appropriate Method
Based on the transaction profile and available data, the most appropriate transfer pricing method is selected in line with the arm’s length principle and UAE Corporate Tax requirements.
Step 4: Identify Comparable Data
Comparable companies or transactions are identified using recognized databases, screening criteria, and comparability factors relevant to the transaction.
Step 5: Determine the Arm’s Length Range
The financial data of comparable companies or transactions is analyzed to determine the arm’s length range applicable to the controlled transaction.
Step 6: Prepare the Benchmarking Report
A benchmarking report is prepared to document the methodology, comparable selection, financial analysis, arm’s length range, and conclusions. This report can support transfer pricing documentation in the event of a review or audit.
Documents and Information Required
To conduct a transfer pricing benchmarking analysis in the UAE, businesses generally need to provide financial, legal, and transactional information related to the controlled transactions being reviewed.
The required documents may include:
- Group structure chart
- Details of related party and connected person transactions
- Intercompany agreements
- Financial statements
- Trial balances or segmental financial statements
- Functional profiles of the parties involved
- Existing transfer pricing documentation, if available
- Details of management fees, royalties, service charges, loans, or cost allocations
The exact documentation required may vary depending on the business structure, transaction type, and scope of the benchmarking review.
Why Choose Farahat & Co. for Benchmarking Services?
Farahat & Co. provides benchmarking analysis services for businesses that need well-supported, compliance-focused documentation for their related-party and connected-person transactions.
Our work covers the full benchmarking process — from transaction review and functional analysis through to method selection, comparable data search, arm’s length range calculation, and preparation of a structured benchmarking report. Every engagement is handled with technical accuracy and a practical understanding of UAE Corporate Tax compliance requirements.
The result is a benchmarking report that strengthens your transfer pricing documentation, supports your pricing position, and prepares your business to respond confidently to any FTA review.