The short answer
UAE companies must price transactions with related parties and connected persons at arm’s length. A master file and local file are required if UAE revenue is at least AED 200 million or the group’s revenue is at least AED 3.15 billion. Smaller groups usually still file a related-party disclosure with the corporate tax return.
What does the arm’s length rule require?
That prices between related parties match what independent businesses would agree in the same circumstances. It covers sales of goods, services, loans, guarantees, royalties and cost recharges between companies under common ownership or control, and between a business and its owners or their relatives. The FTA can adjust taxable income where pricing does not meet the standard, adding 9% tax on the difference above the AED 375,000 band (Cabinet Decision No. 116 of 2022).
When do I need a master file and local file?
When the UAE business has revenue of at least AED 200 million in the tax period, or belongs to a multinational group with consolidated revenue of at least AED 3.15 billion (Ministerial Decision No. 97 of 2023). The master file describes the group, its value chain and policies; the local file documents each material UAE transaction and the benchmarking behind its price. The FTA can ask for them at any time, so they need to exist before anyone asks.
“ensure taxpayers can prove the arm's length basis for pricing their transactions”
What goes in the related-party disclosure?
A schedule filed with the corporate tax return, listing related-party transactions by category. According to the FTA's return guidance as summarised by Deloitte, it applies when the total value of related-party transactions exceeds AED 40 million, with each category above AED 4 million listed. A separate schedule covers payments to connected persons, such as owners and directors, above AED 500,000.
Why does transfer pricing matter for free zone companies?
Because arm’s length pricing is one of the conditions for keeping the 0% rate as a Qualifying Free Zone Person. Overpaying a mainland sister company, or under-charging one, can cost more than a tax adjustment: failing a condition removes the regime for five tax periods (Ministry of Finance free zone decisions). Groups with free zone and mainland entities should review intra-group pricing before the first return is filed.
How do you prepare a transfer pricing file?
In four steps. We map every related-party flow from the ledger and contracts. We characterise each entity: what it does, which risks it carries and which assets it uses. We select a method, usually the transactional net margin method for services and distribution, and benchmark it against comparable independent companies. Then we write the file and, where pricing falls outside the range, recommend year-end adjustments before the books close.
Frequently asked questions
Do small businesses need transfer pricing documentation?
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Not a master or local file unless the AED 200 million or AED 3.15 billion thresholds are met. The arm’s length rule still applies, and the disclosure schedule may still be required.
Are payments to owners covered?
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Yes. Payments to connected persons such as owners, directors and their relatives must be at market value to be deductible.
How often should benchmarks be updated?
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Commonly every three years, with financial data refreshed each year. Material changes in the business call for a new analysis.
Sources
- Ministry of Finance issues decision on transfer pricing documentation requirements (Ministerial Decision No. 97 of 2023) — UAE Ministry of Finance, 11 May 2023. Checked 16 October 2026.
- UAE transfer pricing disclosures in the corporate tax return (summary of the FTA Corporate Tax Guide for Tax Returns) — Deloitte Middle East. Checked 16 October 2026.
- Ministry of Finance announces new decisions relating to Corporate Tax for Free Zones (Cabinet Decision No. 55 of 2023, Ministerial Decision No. 139 of 2023) — WAM, Emirates News Agency. Checked 16 October 2026.
- Cabinet Decision No. 116 of 2022 on the annual Taxable Income subject to Corporate Tax (AED 375,000) — UAE Ministry of Finance. Checked 16 October 2026.