If your business operates in the UAE and engages in transactions with related parties, transfer pricing documentation is no longer optional. Under the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), all taxable persons must ensure their related party transactions comply with the arm’s length principle and are properly documented.
As businesses file their second round of corporate tax returns in 2026, the Federal Tax Authority is paying closer attention to transfer pricing compliance. With new penalties taking effect on 14 April 2026 under Cabinet Decision No. 129 of 2025, getting your documentation right has never been more critical.
At Qaspro Global, we help businesses across the UAE prepare compliant transfer pricing documentation and navigate the complexities of the corporate tax framework. In this guide, we break down everything you need to know about transfer pricing documentation requirements for 2026.
What Is Transfer Pricing and Why Does It Matter?
Transfer pricing refers to the pricing of transactions between related parties, such as a parent company and its subsidiary, two companies with common ownership, or a business and its connected persons. These transactions can include the sale of goods, provision of services, licensing of intellectual property, loans, and management fees.
The UAE Corporate Tax Law requires that these transactions be conducted at arm’s length, meaning the prices should be comparable to what unrelated parties would agree upon under similar circumstances. If the FTA determines that a transaction was not at arm’s length, it has the power to adjust the taxable income of the business, which could result in additional tax liabilities and penalties.
Key Point: Article 55 of the UAE Corporate Tax Law makes transfer pricing documentation a legal requirement. Non-compliance can trigger FTA audits, income adjustments, and financial penalties.
Who Needs to Prepare Transfer Pricing Documentation?
The documentation requirements depend on the size of your business and the volume of related party transactions. The UAE applies a tiered approach with different obligations at different thresholds.
Transfer Pricing Thresholds
Key Documentation Triggers for UAE Businesses
AED 40M
Related Party Transactions – Disclosure Form Required
AED 200M
Revenue – Master File & Local File Required
AED 3.15B
Group Revenue – Country-by-Country Report Required
Transfer Pricing Disclosure Form (TPDF)
Every taxable person engaging in related party transactions that exceed AED 40 million in aggregate must submit a Transfer Pricing Disclosure Form along with their annual corporate tax return. This form is also required if payments to connected persons exceed AED 500,000. The TPDF must be filed within nine months from the end of the relevant tax period.
The Disclosure Form requires details including the name and tax residence of the related party, the type of transaction, the transfer pricing method applied, the arm’s length value, and any tax adjustments made.
Master File and Local File
A Master File and Local File must be prepared and maintained if either of the following conditions is met: the taxable person’s revenue in the relevant tax period is AED 200 million or more, or the taxable person is a constituent company of a multinational enterprise (MNE) group with total consolidated group revenue of AED 3.15 billion or more.
The Master File provides a high-level overview of the MNE group, including its organisational structure, business operations, intangible assets, intercompany financial activities, and global tax positions. The Local File provides detailed information about the specific related party transactions of the UAE entity, including a functional analysis, comparability analysis, and the transfer pricing methods used.
Country-by-Country Report (CbCR)
MNE groups with total consolidated revenue of AED 3.15 billion or more must file a Country-by-Country Report. The CbCR provides a jurisdiction-by-jurisdiction breakdown of revenue, profit, tax paid, and economic activity indicators. It must be filed within 12 months following the end of the reporting fiscal year.
The Five Accepted Transfer Pricing Methods
The UAE follows the OECD Transfer Pricing Guidelines and recognises five methods for establishing arm’s length pricing. Choosing the right method depends on the nature of the transaction and the availability of comparable data.
The most appropriate method should be selected based on the facts and circumstances of each transaction. In practice, the TNMM is the most commonly used method in the UAE due to the limited availability of comparable uncontrolled transactions in the region.
What Happens If You Do Not Comply?
The consequences of non-compliance with transfer pricing requirements in the UAE are severe and are becoming more punitive under the revised penalty framework effective from 14 April 2026.
Penalty Escalation for Transfer Pricing Non-Compliance
Failure to Maintain Records
AED 10,000 – AED 20,000 per violation
Voluntary Disclosure
1% monthly penalty on tax difference
Post-Audit Discovery
15% fixed penalty + 1% monthly
Beyond penalties, the FTA can make transfer pricing adjustments to your taxable income. If the FTA determines that a transaction was not at arm’s length, it will recalculate the taxable income based on arm’s length pricing, which could result in additional corporate tax at 9% plus the associated penalties and interest.
The FTA’s audit capacity has expanded significantly, with over 93,000 inspection visits conducted in 2024 alone. Risk-based audit selection now extends to corporate tax filings, meaning businesses with large related party balances, inconsistent margins, or missing documentation are likely to be flagged. For more on the updated penalty framework, see our detailed guide.
How to Prepare Your Transfer Pricing Documentation
Preparing compliant transfer pricing documentation requires a structured approach. Here is what your documentation should cover to withstand FTA scrutiny.
Transfer Pricing Documentation Checklist
✓ Group organisational chart with ownership percentages
✓ Description of each related party transaction
✓ Functional analysis (functions, assets, risks)
✓ Comparability analysis with benchmarking data
✓ Selection and application of TP method
✓ Financial data and intercompany agreements
✓ Arm’s length range determination
✓ Copies of relevant contracts and invoices
Common Transactions That Require Attention
Not all related party transactions carry the same level of risk. The following types of intercompany transactions are typically scrutinised more closely by tax authorities worldwide, and the FTA is no exception.
- Management fees and shared service charges – These must reflect the actual services provided and their benefit to the receiving entity.
- Intercompany loans and financing – Interest rates must be benchmarked against arm’s length rates for comparable loans.
- Intellectual property royalties – Payments for the use of trademarks, patents, or know-how must be supported by documentation.
- Sale of goods between group companies – Pricing should be tested against comparable uncontrolled transactions.
Transfer Pricing for Free Zone Businesses
Free zone entities claiming the 0% corporate tax rate as a Qualifying Free Zone Person (QFZP) face additional transfer pricing scrutiny. The FTA and free zone authorities are placing greater emphasis on ensuring that transactions between free zone entities and their mainland or overseas related parties are genuinely at arm’s length.
For QFZPs, transfer pricing compliance is not just about avoiding penalties; it is a prerequisite for maintaining the 0% tax rate. If the FTA finds that a QFZP’s qualifying income has been artificially inflated through non-arm’s length pricing, the entity could lose its qualifying status entirely, exposing all its income to the standard 9% rate.
Practical Steps for 2026 Compliance
With the second corporate tax filing cycle underway, businesses should take the following steps to strengthen their transfer pricing position:
- Identify all related party and connected person transactions. Map out every intercompany flow, including services, goods, financing, and IP arrangements.
- Determine your documentation obligations. Calculate whether your aggregate related party transactions exceed AED 40 million (Disclosure Form) or whether your revenue exceeds AED 200 million (Master File and Local File).
- Select the most appropriate TP method for each transaction. Document the reasoning for your selection based on the OECD guidelines.
- Prepare or update intercompany agreements. Ensure written agreements exist for all material related party transactions and that they reflect the actual terms.
- Conduct a benchmarking study. Use comparable data to validate that your pricing falls within an arm’s length range.
- Maintain contemporaneous documentation. Documentation should be prepared at the time of the transaction, not after an audit notice has been received.
How Qaspro Global Can Help
Transfer pricing is one of the most technically complex areas of corporate tax compliance. Getting it wrong can result in income adjustments, penalties, and loss of tax benefits. At Qaspro Global, our experienced tax consultants provide end-to-end transfer pricing support, including functional and comparability analysis, benchmarking studies, preparation of Disclosure Forms, Master Files and Local Files, review of existing intercompany agreements, and FTA audit defence.
Whether you are a small business with a few related party transactions or a multinational group operating across multiple jurisdictions, we tailor our approach to your specific needs and ensure full compliance with the UAE Corporate Tax Law and OECD Transfer Pricing Guidelines.
Need Expert Help?
Get your transfer pricing documentation right before the FTA comes knocking. Our team ensures your related party transactions are compliant, well-documented, and audit-ready.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax advisor for guidance specific to your situation.