Transfer Pricing Services in Dubai, UAE
Registered Tax Agent Regulated by the FTA (Federal Tax Authority)
Transfer Pricing Documentation and Advisory for UAE Businesses
Transfer pricing governs how transactions between related parties are priced and reported for tax purposes. Under UAE Corporate Tax Law, businesses with related-party transactions are required to apply the arm’s length principle — ensuring that transactions are priced as they would be between independent parties. Farahat & Co. provides specialist transfer pricing services to help businesses meet their documentation requirements, manage compliance risk, and align with both UAE regulations and OECD standards.
✦ Registered Tax Agent with the FTA
✦ Ministry of Economy Approved
✦ OECD Aligned Transfer Pricing Services
✦ 40+ Years of Experience
✦ 30,000+ Clients Served
Challenges and Risks in Transfer Pricing
Businesses with related-party transactions — particularly multinationals allocating revenue between entities across different jurisdictions — face significant transfer pricing risks. When transactions between connected parties are not priced at arm’s length, or when documentation is incomplete, tax authorities may challenge the pricing and impose penalties.
Under UAE Corporate Tax Law, the FTA has the authority to make adjustments where transfer pricing rules have not been properly applied. This makes accurate documentation and a proactive compliance approach essential for any business with cross-border or intra-group transactions.
How Transfer Pricing Rules Apply in the UAE
UAE Corporate Tax Law requires that transactions between related parties and connected persons are conducted in accordance with the arm’s length principle. This means the terms and pricing of intra-group transactions must reflect what independent parties would agree to under comparable circumstances — ensuring that taxable income is not distorted by the relationships between the parties involved.
Transfer Pricing Methods
The UAE follows OECD guidelines in applying arm’s length pricing. The appropriate method depends on the nature of the transaction and the availability of comparable data. The main methods include:
Comparable Uncontrolled Price Method (CUP) Compares the price of a transaction between related parties with the price of a comparable transaction between independent parties. This is the most direct method where reliable comparable data is available.
Transactional Net Margin Method (TNMM) Examines the net profit margin earned on a transaction relative to an appropriate base — such as costs, sales, or assets — and compares it to margins earned by comparable independent businesses.
Cost-Plus Method Calculates an arm’s length price by adding an appropriate gross markup to the costs incurred by the supplier in a controlled transaction — commonly used for the supply of goods or provision of services between related parties.
Resale Price Method Assesses the price at which a product purchased from a related party is resold to an independent customer, working backwards to determine an arm’s length purchase price.
Profit Split Method Divides the combined profits arising from a transaction between related parties based on their respective contributions — used where transactions are highly integrated and cannot be evaluated separately.
How Farahat & Co. Can Help with Transfer Pricing
Transfer pricing compliance requires specialist knowledge, detailed documentation, and a thorough understanding of both UAE regulations and OECD guidelines. Farahat & Co. provides comprehensive transfer pricing services to help businesses manage their obligations accurately and reduce the risk of disputes or penalties.
Our transfer pricing services include:
Transaction Analysis We analyse all transactions covered by the UAE transfer pricing regime — identifying related-party dealings, assessing arm’s length compliance, and flagging areas of risk before they attract FTA scrutiny.
Inter-Company Agreement Review We assist in preparing and reviewing inter-company agreements for proposed or existing transactions, ensuring they are structured in line with the arm’s length principle and properly documented.
Benchmarking and Comparability Analysis We conduct thorough benchmarking studies to identify comparable transactions and establish an appropriate arm’s length range — supporting the selection of the most suitable transfer pricing method for each transaction.
Internal Group Transaction Advisory We provide guidance on intra-group transactions including management fees, royalties, loans, and service charges — ensuring these arrangements meet UAE regulatory standards and are properly supported by documentation.
Local File and Transfer Pricing Report We prepare the local file and transfer pricing report for the relevant financial year — covering the required disclosure of related-party transactions, the methods applied, and the supporting comparability analysis.
Regulatory Compliance and Disclosure We assist with the preparation and submission of disclosure forms, master files, and Country-by-Country Reports — ensuring full compliance with UAE transfer pricing obligations and international reporting requirements.
FAQs
What is the importance of understanding the nature of the companies’ transactions by the finance team to provide valuable information to the TP team?
The finance team serves as the primary source of financial and operational information used by the TP team to assess related-party transactions, guiding the task to its relevant scope, reducing the extra efforts that might be wasted in scanning the companies’ transactions, and helping the TP team to focus on areas that potential related parties might contribute to.
Connected persons are not limited to owners or shareholders, it might include a director or officer who influences the company’s decisions too. Are the companies maintaining adequate internal procedures to justify each member’s role?
In the context of UAE Corporate Tax and Transfer Pricing regulations, identifying connected persons requires businesses to look beyond legal ownership and assess the actual level of control and influence exercised within the organization, the transactions which lead to profit allocation within related parties should reflect the arm’s length principle.
Related parties may be identified through both direct and indirect common ownership. Are the companies able to provide a transparent view of their organizational and ownership structure?
In many cases, related-party relationships may not be immediately visible from the legal structure alone, many indirect ownerships might be considered related parties, especially when we have holding companies, accordingly businesses should maintain accurate and updated organizational charts, shareholder registers, ownership percentages, voting rights details, and supporting legal documentation to demonstrate the relationships between group entities and connected persons.
Members within a group used to facilitate each other, many current accounts are moving and funds flowing, should such arrangements be subject to interest charges in accordance with transfer pricing principles?
Under UAE Corporate Tax and OECD Transfer Pricing principles, intercompany financing transactions must be evaluated based on their actual economic substance and commercial nature, where one group entity provides financial support, advances funds, or allows another entity to benefit from debit balances or financing arrangements, the transaction may be viewed as a loan or financing activity that should ordinarily attract an arm’s length return.
When a member in a group owns intellectual property that benefits other members of the group, is the value of that benefit being appropriately measured and compensated? Have the companies performed a proper DEMPE analysis?
Only legal ownership of intellectual property does not automatically mean an entity can simply recognize all derived returns, the allocation of profits relating to intellectual property should reflect the actual economic contributions made by each entity within the group, so companies should perform a proper DEMPE analysis, which evaluates the functions related to the Development, Enhancement, Maintenance, Protection, and Exploitation of the intellectual property, this analysis helps determine which entities are genuinely contributing to the creation and management of the intangible asset, and whether the financial returns allocated to each entity are consistent with their functional contributions and risks assumed.
Selection of the compared transaction is primarily based on the transaction's nature. In the absence of reliable comparables, would it be possible to use an alternative method?
The selected method should produce a reliable arm’s length outcome given the available data and circumstances, for example if traditional comparable uncontrolled price (CUP), resale price, or cost plus methods cannot be reliably applied due to a lack of data, companies may consider profit-based methods such as the Transactional Net Margin Method (TNMM) or the Profit Split Method.
Where centralized procurement or shared service centers exist, is the allocation methodology reasonably applied across the group?
Proper allocation methodology should reflect the actual benefit received by each group entity and be based on appropriate allocation keys, companies must ensure that shared services or centralized procurement activities provide a demonstrable benefit to the recipients, businesses should maintain supporting documentation such as service level agreements, cost breakdowns, time records, and evidence of service delivery.
Qualifying free zone persons might benefit from tax relief if certain conditions are met, including compliance with transfer pricing requirements. To what extent could these requirements impact the structure and operations of the business?
Transfer Pricing compliance often requires companies to clearly define and document their value chain, ensuring that functions, assets, and risks are appropriately allocated across different entities like free zone and non-free zone entities, this may lead businesses to reassess their group structure, especially where activities are split across jurisdictions, to ensure that the Free Zone entity has sufficient economic substance and is appropriately remunerated for the functions it performs.
Are boards of directors and senior management sufficiently aware of the risks associated with non-compliance with UAE transfer pricing requirements?
Insufficient awareness at the board level can lead to underestimation of key risks, including transfer pricing adjustments, penalties, and potential challenges to tax incentives such as Free Zone benefits, under UAE Corporate Tax rules, transfer pricing is not merely a compliance obligation but a core element of demonstrating that profits are aligned with economic substance and value creation within the group, senior management should be aware that non-compliance may result in significant financial exposure, including retrospective tax assessments by the Federal Tax Authority, interest charges, and administrative penalties, in addition inadequate transfer pricing governance may weaken the company’s position during audits or reviews, particularly where documentation such as the Master File, Local File, and benchmarking studies is incomplete or inconsistent.
Are companies aware of the thresholds and conditions that trigger the requirement to maintain a Master File and Local File under UAE Corporate Tax regulations?
While larger multinational groups are generally more familiar with these requirements due to existing global compliance frameworks, smaller or newly established groups in the UAE may have lower awareness. FTA expects taxpayers to maintain TP documentation, meaning that the Master File and Local File should be prepared on a timely basis and not only in response to an audit.
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