Introduction
Transfer pricing in the UAE is no longer a theoretical concept discussed only in boardrooms of multinational companies. With the introduction of UAE Corporate Tax and alignment with OECD guidelines, transfer pricing UAE compliance has become a real, enforceable requirement for businesses with related-party transactions.
Whether you’re a CFO overseeing regional operations, a tax manager handling intercompany pricing, or an international business owner expanding into the UAE, transfer pricing now directly impacts risk exposure, audit readiness, and financial transparency.
And honestly, many UAE groups are discovering gaps they didn’t even know existed.
What Is Transfer Pricing in the UAE?
Transfer pricing refers to how prices are set for transactions between related parties, such as subsidiaries, parent companies, or entities under common control. These transactions can include:
- Management fees
- Goods and inventory transfers
- Intercompany loans
- Royalties and intellectual property use
- Shared services
In the UAE, transfer pricing rules are based on the OECD arm’s length principle, meaning related-party transactions must be priced as if they were conducted between independent entities.
Why Transfer Pricing Matters Under UAE Corporate Tax?
With corporate tax now in effect, transfer pricing has shifted from “best practice” to legal necessity.
Tax authorities want to ensure profits are not artificially shifted out of the UAE, especially through service charges, royalties, or financing arrangements.
For many businesses, this is where issues arise. Intercompany pricing models built years ago may no longer hold up under scrutiny.
A finance manager in Dubai Marina recently admitted during a review:
“We’ve been charging the same management fee for years; no one ever asked how we calculated it.”
That question is now being asked.
Who Needs to Comply With Transfer Pricing in the UAE?
Transfer pricing UAE regulations apply to:
- Multinational companies (MNCs)
- Large UAE-based corporate groups
- Free zone entities with related-party transactions
- Businesses with overseas branches or subsidiaries
- Companies engaged in cross-border services or financing
If your business deals with related parties, you’re likely within scope.
Key Transfer Pricing Requirements in the UAE
Under UAE tax law, businesses must:
- Apply the arm’s length principle
- Disclose related-party transactions in tax returns
- Maintain appropriate transfer pricing documentation
- Justify pricing methodologies used
Accepted pricing methods include:
- Comparable Uncontrolled Price (CUP)
- Cost-Plus Method
- Resale Price Method
- Transactional Net Margin Method (TNMM)
- Profit Split Method
Choosing the wrong method, or not documenting the choice, can trigger audits and penalties.
Transfer Pricing Documentation: What’s Required?
Local File
Details transactions between UAE entities and related parties, including functional analysis and pricing justification.
Master File
Provides a global overview of the group, structure, intangibles, financial activities, and overall transfer pricing policies.
Disclosure Forms
Submitted with corporate tax returns, summarizing related-party transactions.
Not every business needs all three; thresholds apply, but assuming exemption without verification is risky.
Common Transfer Pricing Risks for UAE Businesses
Here’s where problems typically show up:
- Flat management fees with no cost base
- No benchmarking studies
- Missing intercompany agreements
- Inconsistent pricing year to year
- Poor documentation retention
- Free zone assumptions without substance
Let’s be real, many UAE groups grew fast during the zero-tax era. Transfer pricing simply wasn’t a priority then.
Now, it is.
A UAE Business Snapshot: The Moment Internal Audit Questioned “Why?”
During an internal audit for a regional trading group, a simple question came up:
“Why does the UAE subsidiary remit a 7% service charge to its parent company?”
No one had an answer backed by data.
No benchmarking.
No agreement.
No explanation.
That moment alone led to a full transfer pricing review, one that should’ve happened years earlier.
Case Study: Calculate Capitals Supporting a Regional Group
A UAE-headquartered group with operations in Europe and Asia engaged Calculate Capitals to address transfer pricing compliance.
Challenges:
- Multiple service charges
- Cross-border IP usage
- Inconsistent pricing methods
- No formal documentation
Our Approach:
- A team of transfer pricing specialists
- Functional and risk analysis
- Industry benchmarking studies
- Preparation of Local File and Master File
- Review of intercompany agreements
Outcome:
- Fully OECD-aligned transfer pricing framework
- Reduced audit exposure
- Clear documentation trail
- Confident corporate tax filing
As the group CFO put it:
“Now we’re prepared—not reactive.”
How to Choose the Right Transfer Pricing Advisor in the UAE?
Look for advisors who offer:
- Deep knowledge of UAE tax law
- OECD-aligned methodologies
- Industry-specific benchmarking
- End-to-end documentation support
- Audit defense experience
Calculate Capitals provides practical, defensible transfer pricing solutions, not generic templates.
Conclusion
Transfer pricing in the UAE is no longer optional, informal, or ignorable. With tax authorities increasing scrutiny, businesses must move from assumptions to documentation and from reactive fixes to proactive planning.
If your company has related-party transactions, now is the time to review, document, and align.
FAQs
1. Is transfer pricing mandatory in the UAE?
Yes. Businesses with related-party transactions must comply with UAE transfer pricing rules.
2. Do free zone companies need transfer pricing documentation?
If they transact with related parties, documentation may still be required.
3. What happens if transfer pricing documentation is missing?
This may lead to penalties, adjustments, or audits.
4. Which pricing method should be used?
The most appropriate method depends on the transaction type and available data.
5. When should transfer pricing documentation be prepared?
Ideally before filing corporate tax returns, not after an audit begins.
