Transfer Pricing in the UAE is no longer a niche compliance issue applicable only to multinational enterprises (MNEs). With the introduction of the UAE Corporate Tax regime, Transfer Pricing has become a critical consideration for local groups, family-owned businesses, and domestically operating companies as well.
Many businesses still assume that Transfer Pricing rules apply only to cross-border transactions. However, under UAE law, Transfer Pricing is transaction-driven not border-driven. Even purely domestic related-party transactions fall within scope and may attract scrutiny from the Federal Tax Authority (FTA).
Understanding Transfer Pricing Under UAE Corporate Tax Law
Under the UAE Corporate Tax framework, transactions between Related Parties and Connected Persons must comply with the arm’s length principle, regardless of whether those transactions are international or domestic.
Who Needs to Comply?
- UAE-based corporate groups
- Family-owned and closely held businesses
- Holding and management companies
- Businesses with shared ownership or management
- Entities with Permanent Establishments (PEs)
- Multinational and non-multinational businesses alike
If parties are related or connected under the law, Transfer Pricing compliance becomes mandatory.
The Arm’s Length Principle: The Foundation of UAE Transfer Pricing
The arm’s length principle requires that pricing, terms, and conditions between related parties reflect what independent parties would agree under similar circumstances.
This principle ensures:
- Accurate reporting of taxable income
- Fair allocation of profits
- Prevention of tax base erosion
- Transparency in intercompany transactions
Failure to apply arm’s length pricing may lead to tax adjustments, penalties, and increased audit risk under UAE Corporate Tax regulations.
Transactions Covered Under UAE Transfer Pricing Rules
The UAE Transfer Pricing framework applies to a wide range of transactions, including the following:
- Related-Party Services Transactions
One of the most scrutinised areas under Transfer Pricing.
Examples:
- Management and administrative services
- Technical and IT support
- Shared service arrangements
- Advisory and consultancy services
Key risks:
- Insufficient benefit demonstration
- Weak intercompany agreements
- Charges not aligned with market benchmarks
- Trade in Tangible Goods
Transfer Pricing applies to the movement of physical goods within related entities.
Examples:
- Raw material procurement
- Finished goods sales
- Intercompany trading activities
Pricing must reflect:
- Functional roles
- Risk allocation
- Market comparables
- Value creation within the group
- Intangible Assets and IP Transactions
Often considered the highest Transfer Pricing risk area.
Examples:
- Brand usage fees
- Intellectual property licensing
- Software and technology transfers
- Royalties and know-how
Common challenges:
- Incorrect royalty rates
- Lack of DEMPE analysis
- Poor valuation support
- Intercompany Financial Transactions
Frequently overlooked but heavily scrutinised.
Examples:
- Intercompany loans and advances
- Guarantees
- Interest and financing arrangements
Compliance requires:
- Interest rate benchmarking
- Credit risk assessment
- Commercial rationale documentation
- Permanent Establishment (PE) Transactions
PE-related dealings are under increasing global and UAE scrutiny.
Examples:
- Head office–PE transactions
- Allocation of profits, costs, and assets
- Risk and functional attribution
Incorrect allocations may lead to double taxation and FTA adjustments.
Common Misconception: “Domestic Transactions Don’t Matter”
A frequent assumption among UAE businesses is:
“These are internal or domestic transactions—Transfer Pricing shouldn’t apply.”
This is incorrect.
Why This Assumption Is Risky
- Domestic related-party transactions can materially impact taxable income
- Non-arm’s length pricing can trigger Corporate Tax adjustments
- PE-related dealings are increasingly examined
- UAE law does not exempt domestic transactions from Transfer Pricing rules
Why Transfer Pricing Compliance Is Critical in the UAE
Non-compliance with UAE Transfer Pricing regulations can result in:
- Adjustments to taxable income
- Penalties under UAE Tax Procedures Law
- Increased likelihood of tax audits
- Reputational and financial risk
Proactive Transfer Pricing planning and documentation are essential—not optional.
Key Insight for Businesses and Professionals
Transfer Pricing today is about:
- Understanding transaction substance
- Identifying value creation
- Aligning commercial reality with tax reporting
Key takeaway:
Transfer Pricing is no longer about geography, it’s about transactions.
This makes Transfer Pricing knowledge essential for:
- CFOs and finance leaders
- Business owners and founders
- Tax professionals
- Academicians and students
- Compliance and governance teams
How The Capital Zone Can Help
At The Capital Zone, we support businesses across the UAE with end-to-end Transfer Pricing advisory and compliance services, including:
- Related-party transaction assessment
- Transfer Pricing policy design
- Benchmarking and economic analysis
- Transfer Pricing documentation support
- PE profit attribution analysis
- UAE Corporate Tax compliance alignment
Our experts help ensure that your Transfer Pricing framework is commercially defensible, compliant with UAE regulations, and audit-ready.
Need Practical Guidance on UAE Transfer Pricing?
Whether your transactions involve services, financing, intangibles, or Permanent Establishments, our team can provide clear, practical, and compliant solutions tailored to your business.
Contact The Capital Zone to discuss your Transfer Pricing obligations under the UAE Corporate Tax regime.
