Transfer Pricing in UAE Corporate Tax Compliance & Advisory
UAE has consistently evolving its tax structure and since the introduction of corporate tax, it has provide more clarity about the implementation and compliance of UAE Tax laws. The corporate tax in the UAE has transformed, how businesses manage financial including intercompany transactions. One of the most crucial elements of Corporate tax is Transfer Pricing (TP), a major compliance requirement defined to ensure transparency and fair taxation between the related entities.
Under the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), companies engaging in transactions with related parties must follow the OECD Transfer Pricing Guidelines, ensuring all intercompany dealings are conducted at arm’s length.
What is Transfer Pricing?
Transfer pricing refers to the amount or prices charged for the transactions between related parties such as intercompany transactions, subsidiaries, parent companies, or sister entities within a multinational group.
This includes:
- Purchase or sales of goods & materials
- Facilitation of services such as IT, Management or other technical solutions
- Licensing or use of intellectual property
- Financial transactions (loans, guarantees, cost allocations)
The objective is to ensure that these prices reflect what independent parties would have agreed upon under comparable circumstances.
The main issue: related parties may manipulate prices to shift profits to low-tax jurisdictions, reducing tax liability. To prevent this, the OECD Transfer Pricing Guidelines provide internationally accepted principles.
The Arm’s Length Principle (ALP)
The OECD Transfer Pricing rules are based on Arm’s Length Principle (ALP). It ensures that that all the profits are allocated properly to each entity based on their actual economic activities and contributions.
As per the UAE Federal Tax Authority (FTA), all the business must comply this standard and demonstrate that the related party transactions are in order through proper documentation and benchmarking studies.
Transfer Pricing and UAE Corporate Tax
In terms of UAE corporate tax, Transfer Pricing play an important role in determining the taxable income. All the business must assess and disclose all the related party or concerned person transactions in their annual corporate tax return.
1. Documentation Required
The UAE has adopted the OECD’s three-tier approach to Transfer Pricing documentation:
- Master File: Provide an overview of the group’s global structure, operations and pricing policies.
- Local File: Specify transactions details involving UAE entity and support benchmark data.
- Country-by-Country Report (CbCR): Required for multinational groups with consolidated revenues exceeding AED 3.15 billion.
2. Disclosure Obligations
A taxable person must disclose related party transactions and ensure compliance with the arm’s length principle while filing the corporate tax return.
What is Transfer Pricing in UAE Corporate Tax?
Transfer Pricing in the UAE refers to the pricing of transactions between related parties under Corporate Tax Law. The UAE follows OECD Transfer Pricing Guidelines, requiring companies to maintain arm’s length pricing and proper documentation for related-party transactions to ensure fair and transparent tax reporting.
Why Transfer Pricing Compliance Matters in UAE?
As UAE has fully implemented corporate tax, Transfer Pricing compliance has become an essential regulatory requirement.
Non-compliance can lead to:
- Transfer Pricing adjustments by the FTA
- Increased taxable income and penalties
- Legal disputes and reputational risks
Compliance ensures:
- Fair tax treatment across jurisdictions
- Transparent intercompany pricing
- Reduced risk of audits and penalties
How Alpha Auditing Supports Businesses with Transfer Pricing?
Being an expert Auditing and Accounting Firm, Alpha Auditing offers specialized Transfer Pricing services in Dubai and across the UAE to help businesses with the compliance with the latest tax regulations and OECD standards.
Our Transfer Pricing Services Include:
1. Transfer Pricing Policy Development: We design and implement arm’s length pricing policies tailored to your group’s operating model.
2. Benchmarking and Comparability Analysis: Our experts uses international databases and market data to validate that all your related party transactions indicate fair market value.
3. Documentation Preparation: We provide support in terms of preparing Master File and Local File as per UAE corporate tax OECD requirements.
4. Disclosure & Filing Support: Alpha Auditing ensures accurate reporting of all related-party transactions in your Corporate Tax return.
5. FTA Audit Defense: Alpha Auditing offers complete support in term of Transfer Pricing audit, our experts ensure end to end support, documentation review and representation before the authorities.
6. Strategic Tax Structuring: We help you build compliant yet tax-efficient business structures aligned with global best practices.
Why Choose Alpha Auditing for Transfer Pricing?
- Experienced Tax Professionals: A team of experienced and expert professionals understand the complexities of UAE Corporate Tax and OECD Transfer Pricing framework.
- Comprehensive Compliance Solutions: We provide complete analysis and documentation in terms of Transfer Pricing
- Local Expertise, Global Standards: As a leading professional organization we rely on local expertise that follow global standards.
Conclusion
Transfer Pricing is an essential element of Corporate Tax compliance in the UAE. It ensures that multinational and local group companies declare profit where the real economic activities take place.
A well prepared documentation, benchmarking, and disclosure help you avoid penalties and enhance corporate transparency and financial integrity.
Alpha Auditing provides expert Transfer Pricing advisory and compliance services to help businesses align with the UAE Corporate Tax Law and OECD guidelines.
