As the UAE continues its journey toward global tax transparency and alignment with international standards, transfer pricing (TP) has become a critical area of compliance for businesses operating in the country. With the introduction of the corporate tax law effective from 1 June 2023, the UAE has firmly established its commitment to OECD-aligned tax practices.
This blog highlights key developments in UAE transfer pricing, current compliance requirements, and what businesses should be focusing on in 2025.
Transfer Pricing in the UAE: Where We Stand
Under the UAE Corporate Tax Law, any business that is part of a multinational enterprise (MNE) group with cross-border related party transactions must comply with OECD-style TP requirements.
The UAE TP regime requires:
- Transfer Pricing Disclosure Form – to be filed with the corporate tax return.
- Master File & Local File – if thresholds are met (typically if part of a group with consolidated global revenues ≥ AED 3.15 billion or if annual UAE revenue ≥ AED 200 million).
The arm’s length principle must be applied for all related party transactions, including:
- Intra-group services
- Intercompany loans and guarantees
- Royalty and license arrangements
- Shared service costs
What’s New in 2025?
Several updates have emerged that businesses must be aware of:
✅ TP Penalty Framework (Proposed)
The UAE is expected to introduce administrative penalties for failure to maintain proper TP documentation or incorrect disclosures — with implementation expected in Q3 2025.
✅ Focus on compliance:
– The format of the TP disclosure form was introduced, and UAE businesses need to assess applicability to the thresholds to ensure compliance
✅ Announcement of the APA program
The FTA announced that applications for the Advance Pricing Arrangement would be accepted from the third quarter of 2025. UAE businesses can opt for the APA program to avail certainty on their transfer pricing prices, policies and business models and assists in reducing disputes with regulatory authorities
✅ Focus on Management Fees and Shared Services
The FTA is paying close attention to intercompany charges for services, requiring:
- Evidence of actual economic benefit
- Cost allocation methodologies
- Written service agreements
What Should UAE Businesses Do?
To ensure full compliance and minimize tax risk, companies should:
- Map All Related Party Transactions – Including services, financing, and IP-related payments.
- Prepare TP Documentation – Maintain a Master File and Local File even if you are near the documentation threshold to be audit-ready.
- Ensure Substance Alignment – Your business model and substance reports (e.g., ESR) must support the pricing of intercompany transactions.
- Review Contracts and Invoicing – Formalize intercompany arrangements with written agreements and ensure consistent invoicing practices.
- Coordinate Across Functions – Align your transfer pricing positions with VAT, ESR, and legal to ensure consistency across filings.
Final Thoughts
Transfer pricing is now an integral part of the UAE’s tax compliance ecosystem. As enforcement becomes more sophisticated and documentation requirements tighten, the time to act is now.
Businesses that take a proactive approach — through proper documentation, internal training, and risk assessment — will be best positioned to avoid penalties and build trust with the FTA.
Need Support?
If you are unsure about your TP compliance readiness, or need assistance with preparing documentation and disclosures, our professional advice can help you navigate this evolving landscape confidently.