Running a company in Dubai isn’t just about closing deals and pleasing customers, it’s also about complying with a corporate tax framework that’s still new for many business owners. Transfer pricing, the rules that govern how you price goods, services and intellectual property when dealing with subsidiaries or affiliates might sound like corporate jargon, but it has a direct impact on how much tax your business pays and whether you stay on the right side of the Federal Tax Authority (FTA).
In June 2023 the UAE introduced its first federal corporate tax. Profits up to AED 375 000 are taxed at 0 %, and profits above that are taxed at 9 %. Free zone entities can still enjoy a 0 % rate on qualifying income, but they must meet strict conditions including transfer pricing compliance or risk losing that benefit. The FTA also requires transfer pricing disclosures and documentation for any “controlled transactions,” meaning any cross‑border or domestic dealings with related parties or connected persons.
This guide demystifies transfer pricing for UAE businesses. We’ll explore what it is, why it matters and how to comply, then offer some practical tips for building your own transfer pricing policy.
What is Transfer Pricing?
In simple terms, transfer pricing is the practice of setting prices for goods, services and intellectual property when the parties involved belong to the same group. According to the UAE corporate tax law, these controlled transactions include intra‑group purchases, sales, asset sharing, management services, agency commissions, IP transfers, cost‑sharing agreements, royalty payments, leases, salaries and bonuses to partners and directors.
Why does pricing within a group matter? Because if a company sells products to its foreign subsidiary at a discount, it can shift profits from a high‑tax country to a low‑tax one. To prevent this, the UAE’s arm’s‑length principle says transactions between related parties must mirror the prices and terms that unrelated parties would use. The FTA can adjust taxable income if it finds that prices deviate from market conditions.
Why Transfer Pricing Matters in the UAE
Transfer pricing is not just an accounting exercise; it has real consequences:
- Avoiding penalties and disputes: Proper documentation and compliance with transfer pricing regulations prevent hefty penalties and tax disputes. Accurate transfer pricing practices improve a company’s credibility with tax authorities and stakeholders while ensuring fair profit allocation globally.
- Preventing base erosion: By ensuring transactions are at arm’s length, transfer pricing rules stop multinationals from shifting profits out of the UAE and eroding the local tax base.
- Maintaining free zone benefits: One of the conditions for qualifying free‑zone companies to keep their 0 % tax rate is that they comply with transfer pricing regulations and maintain proper documentation. Non‑compliance could mean losing that preferential rate for the current year and four future years.
- Building trust and transparency: Accurate transfer pricing shows regulators and investors that your business operates ethically and distributes profits fairly. This transparency builds credibility with stakeholders and investors.
Transfer pricing is an ongoing process, not a one‑time exercise. Gulf News emphasizes that businesses must update their policies regularly, especially when regulations change or when their revenue exceeds certain thresholds. Even small and medium enterprises that fall below the documentation threshold should follow best practices to avoid disputes.
Key Components of a Transfer Pricing Policy
- Arm’s‑length principle: Companies must price transactions with affiliates as if dealing with independent parties.
- Documentation: Mandatory documentation generally includes a master file, local file and, for large multinationals, a country‑by‑country report (CbCR). The master file explains the group’s structure and pricing policies, while the local file details the UAE entity’s operations and benchmarks.
- Methodologies: Accepted methods include the Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin (TNMM) and Profit Split methods. Each has its place depending on the type of transaction; for example, CUP compares the intercompany price with that charged to an independent buyer, while Cost Plus adds a markup to the supplier’s costs.
- Compliance with OECD guidelines: UAE rules are aligned with OECD standards and require adherence to global norms.
- Risk management: Businesses must identify risks associated with transfer pricing adjustments and design a policy to mitigate them.
Creating a robust policy is not just about compliance, it also helps the business make strategic decisions on supply chain structure, market entry and pricing strategies.
Transfer Pricing and Corporate Tax: The Connection
Over 60% of global trade occurs between related companies. Without proper transfer pricing rules, these internal prices could be manipulated to reduce tax bills. The guide explains that transfer pricing is crucial for fair tax collection, transparency, competition and alignment with international standards.
With the UAE’s corporate tax law in effect since June 2023, businesses operating locally and internationally must ensure that their transfer pricing matches market realities. This means applying suitable methods, keeping contemporaneous documentation and being able to explain how prices were determined. Failure to do so can lead to adjustments, penalties or double taxation.
Transfer Pricing Requirements in the UAE
Under the new corporate tax law, UAE businesses have several obligations:
- Related‑party disclosures: Companies must report details of controlled transactions in their corporate tax return.
- Documentation thresholds: Businesses that cross certain revenue or transaction thresholds must maintain a master file and local file in prescribed formats. Even SMEs below these thresholds are encouraged to keep proper records.
- Transfer pricing disclosure form: Every taxable person must attach a disclosure form with the corporate tax return, though the exact contents are yet to be finalized.
- APAs and advance rulings. Taxpayers can apply for Advance Pricing Agreements (APAs) to gain certainty about the transfer pricing method used.
- Penalties for non‑compliance: TulparTax warns that failing to maintain documentation or file required reports can attract fines starting at AED 10 000 and potentially running into the millions for serious breaches. Free‑zone companies risk losing their 0 % tax benefits for five years if they ignore transfer pricing rules.
Common Challenges and Tips for Compliance
Several challenges businesses face when implementing transfer pricing:
- Finding comparables: Identifying reliable market data for unique transactions can be tough.
- Different regulations: Multinationals must navigate varying rules across countries.
- Choosing the right method. Each method has pros and cons; picking the wrong one can distort profits.
- Document management. Preparing master and local files requires time, expertise and discipline.
- Audit readiness. Companies must be prepared for tax authority reviews.
To mitigate these challenges:
- Benchmark carefully. Use independent data to justify prices and update benchmarks regularly.
- Train internal teams. Make sure finance and tax teams understand transfer pricing concepts.
- Use technology. Automated systems can track intercompany transactions and generate reports.
- Consider APAs. For complex arrangements, an APA provides certainty and reduces the risk of future disputes.
- Seek professional support. An experienced adviser can help you design a compliant policy and represent you during audits.
Benefits of a Transfer Pricing Policy
A well‑designed transfer pricing policy offers more than risk mitigation. Such a policy helps companies:
- Optimise tax: By allocating profits appropriately among entities, companies can reduce their overall tax burden.
- Improve financial reporting: Transparency and accuracy in pricing improve the quality of financial statements.
- Avoid double taxation: Proper documentation prevents the same income from being taxed in multiple jurisdictions.
- Support strategic decisions: Transfer pricing policies guide supply‑chain decisions and market entry strategies.
Best Transfer Pricing Partners in Dubai
Choosing the right adviser can make compliance smoother and add strategic value. Below are five respected firms offering corporate tax and transfer pricing support in Dubai. This list is neutral and based on publicly available information; the ranking reflects general strengths rather than market share.
| Ranking | Firm | Why They Stand Out | Unique Benefits |
| 1 | Bestax Chartered Accountants | Bestax began over a decade ago in Dubai and has grown into a multidisciplinary firm with a presence in Canada and across the UAE. Their team includes chartered accountants, tax advisers and transfer pricing specialists who help clients design arm’s‑length pricing policies, prepare master and local files and navigate APAs. They combine local knowledge with international standards and use cloud‑based tools to streamline compliance. | Long track record in Dubai corporate tax and VAT; personalised service for SMEs and multinationals; integrated audit, tax and advisory capabilities; strong focus on technology and training; experience representing clients before the FTA. |
| 2 | Kreston Menon | Part of the global Kreston network, this firm offers a full suite of transfer pricing and corporate tax services. Their detailed transfer pricing guide explains why transfer pricing prevents profit shifting, ensures fair tax collection, promotes transparency and aligns with OECD standards. | Access to international comparables through a global network; experience helping clients prepare master and local files; ability to handle multi‑jurisdictional audits; strong resources for benchmarking and economic analysis. |
| 3 | Jitendra Tax Consultants (Tax Gian) | With more than two decades of presence in the UAE, this consultancy advises businesses on creating comprehensive transfer pricing policies. They outline components such as arm’s‑length pricing, documentation and risk management. | Specialises in tax compliance and advisory for free‑zone and mainland companies; offers training on UAE transfer pricing regulations; provides risk assessment and policy drafting; emphasises regulatory compliance to avoid penalties. |
| 4 | Meyer‑Reumann & Partners | A legal consultancy established in 1989, Meyer‑Reumann provides corporate tax and transfer pricing advice grounded in UAE and international law. They explain how mispriced intra‑company transactions can shift profits to low‑tax jurisdictions and highlight the UAE’s arm’s‑length methods. | Strong legal perspective on related‑party definitions and compliance requirements; experience with APAs and documentation for complex group structures; ability to integrate legal and tax advice. |
| 5 | Tulpar Tax | A Dubai‑based tax advisory firm that emphasises transfer pricing compliance and benchmarking. They are experts for penalties for non‑compliance that start at AED 10 000 and can climb significantly, and that free‑zone companies can lose their 0 % tax status if they ignore transfer pricing. | Offers transfer pricing studies, benchmarking and preparation of documentation; guides businesses through FTA audits; provides industry‑specific insights and helps structure cross‑border transactions to meet arm’s‑length standards. |
Final Thoughts
Transfer pricing might seem daunting at first, but it’s central to the UAE’s corporate tax system. Businesses of all sizes, from family‑owned trading companies to multinational groups must ensure that prices for intra‑group transactions mirror market conditions. Proper transfer pricing policies help you avoid penalties, optimize tax, maintain free‑zone benefits and build trust with investors and tax authorities.
Whether you’re just starting to draft a policy or seeking an expert to review your documentation, partnering with a knowledgeable adviser can make the process smoother. Firms offer integrated tax and transfer pricing services that blend local insight with international best practices. By investing in robust transfer pricing now, you’ll protect your business from costly surprises and position yourself for sustainable growth in the UAE’s evolving tax landscape.
