🔹 1. What is Transfer Pricing (TP)?

Transfer Pricing refers to the pricing of transactions between related parties or connected persons, such as:

  • Sale or purchase of goods
  • Provision of services
  • Loans or interest payments
  • Use of intellectual property (royalties, licenses, etc.)

All such transactions must comply with the Arm’s Length Principle — meaning they should be priced as if they were conducted between independent, unrelated parties.

🏛️ 2. Why Did UAE Introduce TP Thresholds?

Under the UAE Corporate Tax regime, Transfer Pricing rules were introduced in line with OECD Guidelines.

To minimize the compliance burden on smaller businesses, the UAE Federal Tax Authority (FTA) established materiality thresholds. These thresholds determine who must file detailed TP disclosures and help ensure that only entities with significant related-party dealings have to submit additional documentation.

🚦 3. Materiality Thresholds

You are required to disclose related-party transactions only if they exceed the following limits:

Threshold Type Value Meaning
Total related-party transactions AED 40 million (per tax period) If total related-party transactions exceed AED 40M (measured at market value or as per financial statements), a Transfer Pricing Disclosure Form must be filed along with the Corporate Tax Return.
Per transaction category AED 4 million If the AED 40M overall threshold is breached, each transaction category (goods, services, IP, interest, etc.) exceeding AED 4M must be reported in detail.
Payments to connected persons AED 500,000 per person Disclose payments or benefits made to any connected person exceeding AED 500,000 during the tax period.

📄 4. What is the TP Disclosure Form?

The Transfer Pricing Disclosure Form is submitted via the EmaraTax portal along with your UAE Corporate Tax Return.

It typically includes:

  • List of related parties and connected persons
  • Nature and amount of transactions
  • Transfer Pricing method(s) applied
  • Details of benefits or payments to connected persons

📊 5. Example Scenario

Transaction Type Amount Threshold Breached? Report Required?
Goods purchased from UAE parent company AED 42 million ✅ Yes (exceeds AED 40M) TP Disclosure Form required
Services received from group company AED 3 million ❌ No (below AED 4M) No detailed reporting required
Bonus paid to director (connected person) AED 600,000 ✅ Yes (exceeds AED 500k) Must disclose connected person details

✅ 6. If You Don’t Exceed the Thresholds

Even if your transactions don’t meet the above thresholds:

  • The Arm’s Length Principle still applies to all related-party transactions.
  • The FTA may review or audit any transaction to ensure proper pricing.
  • You should retain supporting documents to substantiate that your pricing is arm’s length.

🧾 7. Documents Required (If Thresholds Are Crossed)

If you exceed the materiality limits, ensure you maintain and submit:

  • Transfer Pricing Disclosure Form
  • Schedule of related-party transactions
  • Details of payments to connected persons
  • Master File & Local File (for qualifying large or MNE groups)
  • Agreements, benchmarking analyses, and pricing justifications

Note: The Master and Local File requirement applies only if you meet specific criteria set by the FTA or are part of a multinational enterprise (MNE) group that meets the OECD thresholds.

📅 8. Suggested Action Plan

✔ Review all related-party and connected-person transactions
✔ Check if thresholds (AED 40M / 4M / 500k) are exceeded
✔ Prepare the TP Disclosure Form (if applicable)
✔ Gather supporting documentation (contracts, benchmarking reports, pricing models)
✔ File the disclosures along with your Corporate Tax Return through the EmaraTax portal

🔚 9. Key Takeaways

  • Thresholds determine the need for detailed disclosure, not the applicability of TP rules.
  • All related-party transactions must still follow arm’s length pricing, regardless of thresholds.
  • Maintain documentation proactively — even if no disclosure form is required.
  • Staying compliant reduces the risk of FTA adjustments or penalties in case of audit.