Transfer Pricing & Corporate Tax in the UAE

What transfer pricing actually means

Transfer pricing sounds like something only multinationals worry about, but under UAE corporate tax it can touch almost any owner-managed business. It is simply the set of rules that decide how transactions between connected businesses and people must be priced for tax.

The core idea is the arm's length principle: a deal between related parties should be priced the same way it would be if the two sides were completely independent. If your company buys stock from a business you also own, or pays rent to yourself as the landlord, the price has to be one a stranger would have agreed to.

This matters because the Federal Tax Authority (FTA) wants to stop profit being shifted artificially between connected entities to lower a tax bill. Getting the pricing right, and being able to show your working, is what keeps you compliant.

How it fits into UAE corporate tax

UAE corporate tax applies to financial years starting on or after 1 June 2023. The headline rate is 0% on taxable income up to AED 375,000 and 9% on taxable income above that, administered by the FTA.

Transfer pricing is written into the corporate tax law, so it is not optional or separate. When you calculate your taxable income, any income or expense from a related party or connected person must reflect an arm's length value, and the FTA can adjust your figures if it does not.

This is general information, not tax advice. Confirm the current rules, rates and thresholds with the Federal Tax Authority (FTA) or a qualified local tax professional before you file.

Who counts as a related party or connected person

The rules use two terms. Related parties are broadly businesses and individuals linked by ownership or control, such as a parent company, a subsidiary, or two companies owned by the same person or family. Connected persons are typically owners, directors and their relatives, and any entity they control.

• Two companies you own that trade stock or services with each other.
• Rent, a loan, or a management fee paid between you and your own business.
• Salary, bonus or benefits paid to an owner-director or a family member who works in the business.
• Goods or services bought from a sister company or a relative's firm at a special price.
• Interest charged on a loan from a shareholder to the company.

The arm's length principle in practice

Applying the principle means asking one question for every related-party transaction: would an unrelated business have accepted this price and these terms? If yes, you are on solid ground. If the price is clearly generous or artificially low, you may need to adjust it for tax.

You show a price is arm's length with evidence. That can be quotes or invoices from independent suppliers for the same goods, published market rents for a similar unit, or standard interest rates for a comparable loan. The point is to compare your related-party deal against what the open market charges.

You do not need a formal study for a simple deal, but you do need to be consistent and keep the supporting documents. Reconstructing this a year later from memory is where most small businesses come unstuck.

What you have to file and keep

There are three levels of transfer pricing obligation, and most small businesses only meet the first one.

• Transfer Pricing Disclosure Form: submitted alongside your corporate tax return where related-party and connected-person transactions exceed the relevant reporting thresholds. This summarises those transactions for the FTA.
• Local File and Master File: detailed documentation required where the business has revenue of at least AED 200 million in the tax period, or is part of a multinational group with consolidated group revenue of at least AED 3.15 billion. These thresholds put most small firms outside the requirement.
• Country-by-Country Reporting: only for large multinational groups, well beyond the scale of a typical UAE small business.
• Underlying records: even when no file is required, you should keep invoices, contracts, and the evidence that your related-party prices are arm's length, ready if the FTA asks.

A simple way for a small business to stay compliant

1. 1

   List your related parties

   Write down every business, owner, director and relative you transact with. This is your map of who the rules apply to.

2. 2

   Flag the transactions

   For each one, note what you buy, sell, rent, lend or pay. Rent, loans, management fees and family salaries are the usual ones to watch.

3. 3

   Benchmark the price

   Gather simple evidence that each price is what the open market would charge, such as third-party quotes or published rates, and save it with the transaction.

4. 4

   Record everything cleanly

   Keep the invoices, contracts and workings in one place so a related-party figure can always be traced back to a document.

5. 5

   Review before filing

   At year end, check whether you cross the disclosure or documentation thresholds, then confirm the position with a qualified local tax professional before you submit your return.

Where Tallium AI helps

Transfer pricing lives or dies on clean records, and that is exactly what a good system gives you. Tallium AI is one all-in-one app covering accounting, invoicing, POS, inventory and e-commerce, plus Marketing and CRM in the same account, so every related-party invoice, expense and payment is captured in one ledger you can search and export.

The AI does the heavy lifting: it scans and categorises receipts, tracks expenses, and turns your data into reports and insights, so when you fill in a disclosure form or answer an FTA question the numbers are already organised. It also handles VAT and corporate-tax-ready reporting so nothing sits in a spreadsheet you forgot about.

Every plan includes unlimited users with no per-seat fees, so your bookkeeper, accountant and family partners can all work in the same records. Pricing is one simple flat monthly price in US dollars, billed monthly and cancel anytime: the shop or store plan is $79, online store $159, warehouse $99 and factory $269 per month, each including the full core. See the full breakdown on our pricing page.