Transfer Pricing in the UAE: What Every Business Owner Needs to Know

As the UAE aligns with international tax standards, transfer pricing rules have become increasingly important for businesses, especially those with cross-border transactions. Understanding these rules helps prevent tax disputes, penalties, and double taxation.

What Is Transfer Pricing?

Transfer pricing (TP) refers to the pricing of goods, services, or intangibles between related entities within the same corporate group, often across different jurisdictions.

• The UAE follows OECD-aligned transfer pricing guidelines.

• TP ensures that transactions between related parties are conducted at arm’s length, meaning the prices are comparable to those between independent entities.

Who Must Comply with Transfer Pricing Rules?

Transfer pricing rules apply to:

• UAE-based companies that are part of a multinational group.

• Companies with cross-border transactions with related parties.

• Free zone entities engaged in international trade within their corporate group.

Domestic transactions between unrelated parties are generally not subject to TP rules.

Key Transfer Pricing Requirements

Documentation

• Businesses must maintain transfer pricing documentation demonstrating that transactions are conducted at arm’s length.

• Documentation includes contracts, invoices, benchmarking studies, and financial analysis.

Reporting

• Large or multinational entities may need to submit TP disclosures in their Corporate Tax returns.

• Complying with reporting requirements ensures transparency and avoids penalties.

Adjustments

• Tax authorities may adjust profits if related-party transactions are not at arm’s length, which could increase taxable income and result in fines.

Benefits of Complying with Transfer Pricing Rules

Avoid penalties:

Non-compliance can lead to fines and interest.

Mitigate double taxation risk:

Proper documentation reduces disputes with tax authorities.

Strengthen financial credibility:

Arm’s length pricing reflects accurate profit allocation and governance.