Key takeaways
- Every business must price related-party dealings at arm's length; the thresholds decide only what you file and what you must keep ready.
- Under the FTA's tax-return guidance, a disclosure form is needed above AED 40 million of related-party transactions, and a connected-person schedule above AED 500,000 to any one person.
- A Master File and Local File are required at AED 200 million of revenue, or in an MNE group with revenue of AED 3.15 billion or more, and must be produced within 30 days of a request.
- Domestic unilateral APAs have been available since December 2025 for controlled transactions of AED 100 million or more a period, for a fee of AED 30,000.
UAE transfer pricing reaches well beyond multinationals. Any business that trades with a group company, or pays its owners and directors, is within the rules. The thresholds do not decide whether the rules apply. They decide what is filed with the return and what must be ready to hand to the Federal Tax Authority (FTA) within 30 days of a request. If the FTA finds in an audit that pricing understated the tax, before the business has disclosed it, the penalty is 15% of the tax difference plus 1% a month.
For group tax teams, the practical question is therefore one of evidence. The pricing may well be right; what matters is whether it can be shown to be right in the time the FTA allows.
Two transfer pricing rules that apply to everyone
The first is the arm's length principle (Federal Decree-Law No. 47 of 2022, Art. 34). Transactions with related parties, such as other companies in the group, must be priced as independent parties would price them, using the OECD methods.
The second concerns connected persons (Art. 36). Payments or benefits to owners, directors and officers, and to their related parties, are deductible only at market value and only if made wholly and exclusively for the business.
Who counts as a director or officer
FTA Public Clarification CTP010 (29 April 2026) settles a recurring question. A "director" is a formally appointed board member. An "officer" is someone with authority over strategic decisions. Job titles do not decide it. A "sales director" who is not on the board and has no strategic authority may not be a connected person, while a non-executive board member is. The clarification applies back to 1 June 2023, so returns already filed should be checked for how they treated payments to board members and officers. A tax health check covers this.
What is filed with the return
The FTA's tax-return guidance sets two filing requirements.
A transfer pricing disclosure form is required where related-party transactions in the period total more than AED 40 million. Each category above AED 4 million is then itemised: goods, services, intellectual property, interest, assets, liabilities and other. Dividends are left out of the count.
A connected-person schedule is required where payments or benefits to any one connected person exceed AED 500,000.
Both are submitted with the return itself, due within nine months of the end of the tax period: 30 September 2026 for calendar-year FY2025. The deadline finder confirms other year ends.
What must be ready to produce
Ministerial Decision No. 97 of 2023 requires a Master File and a Local File where:
- revenue in the tax period is AED 200 million or more, or
- the business belongs to a multinational enterprise (MNE) group with consolidated revenue of AED 3.15 billion or more, whatever its own revenue.
The Master File describes the group as a whole. The Local File covers the UAE entity's related-party transactions and shows why their pricing is at arm's length. Neither is filed with the return, but both must be submitted within 30 days of an FTA request. Thirty days is not long enough to build them from nothing, particularly the benchmarking, so they need to exist before anyone asks.
Businesses electing Small Business Relief remain subject to the arm's length rule, but the FTA's guidance on the relief does not require them to keep these files.
Who files what
| Test | Threshold | What it triggers | When |
|---|---|---|---|
| Related-party transactions in the period, excluding dividends | More than AED 40m | Disclosure form, with each category above AED 4m itemised | With the return |
| Payments or benefits to any one connected person | More than AED 500,000 | Connected-person schedule | With the return |
| Your revenue in the tax period | AED 200m or more | Master File and Local File | Within 30 days of an FTA request |
| Your MNE group's consolidated revenue | AED 3.15bn or more | Master File and Local File, whatever your own revenue | Within 30 days of an FTA request |
| Controlled transactions you want certainty on | AED 100m or more a period | Option to apply for a domestic unilateral APA | Before the 3 to 5 periods it covers |
| None of the above | Below every threshold | No forms, but Arts. 34 and 36 still apply | Keep evidence for each period |
A worked example
A mainland distributor has revenue of AED 120 million and belongs to a group with consolidated revenue of AED 2 billion. In FY2025 it:
- buys goods from a group company abroad for AED 55 million;
- pays its parent a management fee of AED 3 million;
- pays a sister company AED 2.5 million of interest;
- pays its parent a dividend of AED 10 million;
- pays its managing director, a formally appointed board member, AED 900,000.
| Test | Figure | Result |
|---|---|---|
| Related-party transactions, excluding the dividend | 55m + 3m + 2.5m = AED 60.5m | Above AED 40m: disclosure form required |
| Categories above AED 4m | Goods: AED 55m | Goods itemised; services (AED 3m) and interest (AED 2.5m) are below AED 4m |
| Largest payment to one connected person | AED 900,000 | Above AED 500,000: connected-person schedule required |
| Own revenue | AED 120m | Below AED 200m |
| Group revenue | AED 2bn | Below AED 3.15bn, so no Master File or Local File requirement |
The company files the disclosure form and the connected-person schedule. It does not need a Master File or Local File, but the AED 55 million of purchases must still be at arm's length, and the FTA can ask for the evidence. If the group's revenue were AED 4 billion, both files would be required, despite the UAE company's own revenue of AED 120 million.
Benchmarking: the evidence behind the price
A benchmarking study compares related-party prices or margins with those of independent businesses performing comparable functions, using one of the OECD methods, to show that the result falls within an arm's length range. It is the core of a Local File and usually the first document to produce when the FTA asks how a price was set. It also ages. A study that supported the pricing three years ago may not support it today.
Domestic pricing deserves the same attention as cross-border pricing. A Qualifying Free Zone Person (QFZP) taxed at 0% selling to a mainland group company taxed at 9% is the obvious case, and for a QFZP, compliance with the transfer pricing rules is one of the conditions for keeping the 0% rate.
Downward adjustments
A downward adjustment reduces taxable income to bring a related-party transaction to arm's length, for example where a group company was charged more than an independent party would have paid. The FTA set out its position on reflecting these adjustments in the return in Public Clarification CTP011 (15 July 2026), which should be read before any such adjustment is claimed.
Advance pricing agreements
An advance pricing agreement (APA) settles the transfer pricing of specified transactions with the FTA in advance, which suits groups with large, recurring intra-group flows that would otherwise be argued over year after year.
The FTA has accepted applications for domestic unilateral APAs since December 2025, under its Corporate Tax Guide on APAs (CTGAPA1, 31 December 2025). They are available where controlled transactions are AED 100 million or more per tax period, and an APA covers 3 to 5 future tax periods, with no rollback to earlier ones. The FTA's fee is AED 30,000 for a new application and AED 15,000 for a renewal or amendment (Cabinet Decision No. 174 of 2025, from 1 January 2026).
Unilateral APAs for cross-border transactions were promised for 2026, with the date to be announced; none had launched at the time of writing. Bilateral and multilateral APAs are to follow later.
How ebs can help
ebs Chartered Accountants is an FTA Registered Tax Agency (TAN 30022834). We map your related-party and connected-person transactions against these thresholds, prepare the disclosure form and schedule for your return, and prepare benchmarking studies, Master Files and Local Files. See transfer pricing or book a free first consultation.
This article is general information as at 25 August 2026, not advice on your specific circumstances. Tax rules change; check the current position before acting.