• Transfer Pricing Advisory Services

Transfer Pricing in the UAE: Regulations, Compliance, and Best Practices

In May 2018, the UAE joined the OECD Inclusive Framework on BEPS, reinforcing its commitment to preventing profit shifting to low-tax jurisdictions. A key aspect of this commitment was the introduction of transfer pricing advisory services in Dubai, ensuring fair transactions between related parties.
Initially, the UAE lacked a structured framework for transfer pricing. However, a significant shift occurred with the introduction of Federal Decree-Law No. 47 of 2022, followed by Ministerial Decision No. 97 of 2023, which set clear requirements for maintaining transfer pricing documentation.
These regulations not only established corporate tax guidelines but also aligned the UAE’s transfer pricing framework with OECD standards and BEPS Action Plans, particularly in areas such as Country-by-Country Reporting (CbCR). As a result, businesses engaged in transactions with related parties or connected persons must now adhere to the OECD Transfer Pricing Guidelines as mandated by UAE tax law.

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  • What is Transfer Pricing - Impact in the Context of UAE Corporate Tax

Transfer Pricing refers to the pricing of goods, services, and intellectual property exchanged between related parties within the same multinational group. The Arm’s Length Principle (ALP) ensures these transactions occur as if they were between independent parties, preventing artificial profit shifting.

Under Articles 34, 35, 36, and 55 of UAE Corporate Tax Law:

Transactions must follow the ALP to ensure fair taxation.
OECD-approved pricing methods must be applied to justify intercompany pricing.
Comprehensive documentation (Local File, Master File, CbCR) is required for compliance.
Disclosures on related-party transactions must be included in tax returns.

Why Transfer Pricing Matters for Businesses

  • Proper TP policies are crucial for:
Avoiding tax disputes and penalties from mispricing transactions.
Reduces the risk of double taxation through proper documentation.
Enhancing transparency and compliance with UAE tax laws.
Strengthens corporate governance by implementing robust TP policies.
Ensuring fair profit allocation across jurisdictions.

Common Transfer Pricing Methods

To determine arm’s length pricing, businesses must apply one of the OECD-approved methods:

Comparable Uncontrolled Price (CUP) Method – Compares prices of similar transactions between independent entities.
Resale Price Method – Determines pricing based on the resale margin of an independent distributor.
Cost Plus Method – Adds a reasonable profit margin to costs incurred in a transaction.
Transactional Net Margin Method (TNMM) – Assesses net profit margins of comparable transactions.
Profit Split Method – Allocates profits between entities based on relative contributions

How to Ensure Compliance

To meet UAE Transfer Pricing requirements, businesses should:
• Conduct benchmarking studies to determine fair pricing.
• Maintain proper TP documentation (Local/Master Files, CbCR).
• Regularly review intercompany transactions to ensure consistency.
• Use technology to streamline compliance.
• Seek expert guidance to stay updated on evolving regulations and avoid penalties.
• Align TP policies with business operations to reflect commercial reality.