Transfer pricing has become an important part of UAE Corporate Tax compliance. Since the UAE Corporate Tax regime introduced transfer pricing rules, businesses dealing with related parties or connected persons must pay closer attention to how they price their transactions.

​But one question confuses many UAE businesses: When is a Transfer Pricing Agreement mandatory under UAE Corporate Tax?​

The simple answer is that related-party transactions do not automatically require a company to have a formal Transfer Pricing Agreement (TPA). Instead, UAE businesses must follow the arm’s-length principle in general, and transfer pricing disclosure and documentation requirements apply only when certain conditions and thresholds are met. Taxpayers can apply for a separate arrangement, known as an Advance Pricing Agreement (APA), with the Federal Tax Authority (FTA).

For businesses planning their tax compliance, understanding this difference is essential. At HA Group, we break down exactly where the line sits in 2026.

What Is Transfer Pricing Under UAE Corporate Tax?

Transfer pricing refers to the pricing of transactions between related parties or connected persons. These transactions can include the sale of goods, management services, loans, royalties, intellectual property, financing, and other business arrangements.​

Source: esmcglobal

Under Articles 34 to 36 of Federal Decree-Law No. 47 of 2022, these transactions usually need to follow the arm’s-length principle. This means the price and terms should be similar to what independent businesses would agree to in the same situation. These rules apply to both local and international transactions.

For example, if a UAE company pays management fees to its parent company in another country, the amount should make business sense. If the fee is much higher than what an independent company would pay for similar services, the deal may need closer scrutiny under transfer pricing rules.

Related Parties vs Connected Persons

  • Related parties are companies that share the same owners or are controlled by the same people, as well as certain family members.
  • Connected persons include your business’s owners, directors, officers, and their related parties.

You can only deduct payments to connected persons if they are at market value. For example, if a director’s salary is much higher than the market rate, the extra amount may not be deductible.

Is a Transfer Pricing Agreement Mandatory in the UAE?

A formal Transfer Pricing Agreement is not usually required only on the grounds that a company has transactions with related parties.

  • Transfer pricing rules: Require every related-party and connected-person transaction to follow the arm’s length principle.
  • Transfer Pricing Agreement: A written intercompany contract between related parties. It records what is supplied, at what price and who carries the risk. The FTA is not a party to it.
  • Transfer pricing documentation: The Disclosure Form, Local File and Master File are required only above set thresholds.
  • Advance Pricing Agreement: An optional arrangement in which the FTA and taxpayer agree in advance how covered transactions will be priced for a defined period.

The Arm’s Length Rule Applies to Every Business

The arm’s length principle, set out in Articles 34 and 35 of Federal Decree-Law No. 47 of 2022, requires that transactions between related parties be equivalent to agreements that unrelated businesses would reach in analogous circumstances. 

Free zone status and Small Business Relief do not switch this rule off.

When Transfer Pricing Disclosure Becomes Mandatory

The first obligation is to submit the Transfer Pricing Disclosure Form with the corporate tax return. It becomes necessary when two thresholds are met:

When Transfer Pricing Disclosure Becomes Mandatory
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  • For related party transactions: Disclosure is required if the total value exceeds AED 40 million, as shown on the market or in the financial statements. Transactions in each category above AED 4 million; for example, those involving goods, services, interest or intellectual property; must then be stated separately.
  • For connected persons: The disclosure rule applies if payments or benefits given to a single connected person and their associated parties together amount to more than AED 500,000.

Since the return is due nine months after the tax period has ended, a year-end of 31 December 2025 corresponds to a deadline of 30 September 2026.

When Does Transfer Pricing Documentation UAE Become Mandatory?

As a result of Ministerial Decision No. 97 of 2023, a taxpayer is required to keep a Master File and a Local File if either of the following conditions applies:

  • Its revenue in the relevant tax period is AED 200 million or more.
  • It is a company that forms part of a multinational group whose consolidated revenue is at least AED 3.15 billion.

These files provide detailed information to support the taxpayer’s transfer pricing position. They are usually not submitted with the corporate tax return. If the FTA requests them, they must be provided within 30 days, unless the FTA gives a different deadline.

2026 Update: Advance Pricing Agreements are now available

The FTA released its Advance Pricing Agreements guide (CTGAPA1) on 30 December 2025, and you can now apply for domestic APAs. According to the FTA’s APA guide:

  • Voluntary: An APA is a certainty tool, not a legal requirement.
  • Phased rollout: Unilateral APAs currently cover domestic transactions, including deals between a Qualifying Free Zone Person and a related mainland company; the cross-border start date is due in 2026.
  • Threshold: Covered transactions should total at least AED 100 million per tax period, treated as an indicator rather than a hard rule.
  • Term and fees: Three to five future tax periods, with a non-refundable AED 30,000 application fee and AED 15,000 on renewal.
  • Timing: File applications at least 12 months before the first covered tax period.

Which Businesses Should Pay Particular Attention?

Take a close look at your transfer pricing if your business has any of the following:

Which Businesses Should Pay Particular Attention
Source: esmcglobal
  • Parent or subsidiary companies in other countries
  • Related party loans or financing
  • Management or administrative service arrangements
  • Royalty or intellectual property payments
  • Significant purchases or sales with group companies
  • Shared employees, assets or business functions
  • A restructuring or transfer of business functions
  • Large transactions between UAE group companies
  • Free zone entities dealing with related parties

If you run a free zone business, don’t assume your status exempts you from these rules. Qualifying Free Zone Persons still need to follow transfer pricing rules as part of regular Corporate Tax compliance.

Why a Written Transfer Pricing Agreement Still Matters

You do not need to meet the criteria for formal documentation in order to fix prices on an arm’s length basis. The Corporate Tax Law, specifically Article 55, enables the FTA to request evidence that the transactions between associated parties were priced fairly and requires you to retain records for seven years; in most cases, depending only on an oral agreement between the owners is not sufficient if the FTA asks for such evidence.

A good agreement should include:

  • What products or services are provided?
  • Which entity executes the relevant functions?
  • How the price is calculated
  • Payment conditions.
  • Responsibility and risk.
  • Intellectual Property Ownership
  • The transfer pricing approach was utilized.

A contract alone does not prove your transaction is at arm’s length. UAE transfer pricing rules focus on what actually happens, so your actions must match what the agreement says.

What Happens If You Get It Wrong

The FTA can adjust your taxable income to arm’s length and collect the additional tax. It can also disallow payments to connected persons that exceed market value.

What Happens If You Get It Wrong
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According to Cabinet Decision No. 75 of 2023, failing to maintain the necessary records is fined AED 10,000, increasing to AED 20,000 for a recurrence within 24 months.  The April 2026 penalty reform affected only VAT and excise fines; these corporate tax penalties still apply.

Transfer Pricing Checklist Before 30 September 2026

  • List all related parties and connected persons, including owners and directors.
  • Sign a written agreement for every type of related party transaction, ideally before the transaction starts.
  • Compare relevant financial figures to the applicable thresholds of AED 40 million, AED 500,000, AED 200 million, and AED 3.15 billion.
  • Keep supporting documents for transfer pricing, such as market quotations or benchmarking studies.
  • Reconcile intercompany invoices with your ledger before filing.

How HA Group Can Help With UAE Transfer Pricing Compliance

Transfer pricing can be complex for businesses with several companies, different countries, or related party arrangements. At HA Group, we help businesses by:

  • Reviewing their related party transactions
  • Assessing which transfer pricing requirements apply
  • Preparing intercompany agreements
  • Organising supporting documentation
  • Filing corporate tax returns with the correct disclosures

Our goal is to help you prepare only what your business needs, so you avoid unnecessary paperwork and meet all your obligations.

FAQs

Is a Transfer Pricing Agreement compulsory for all UAE companies?

No, not all UAE companies need a formal agreement. However, transactions with related parties or connected persons must follow the arm’s length standard.

​Is a Transfer Pricing Agreement and an Advance Pricing Agreement the same?

No, they are not the same. A Transfer Pricing Agreement is a contract between related companies. An Advance Pricing Agreement is a voluntary and binding agreement with the FTA.

What is the UAE transfer pricing threshold for disclosure in 2026?

You must disclose if your total related-party transactions exceed AED 40 million. You must report any category over AED 4 million separately. Also, if payments to one connected person go over AED 500,000, you must disclose this as well.

Is an Advance Pricing Agreement mandatory?

No, an APA is not required. It is optional and mainly for complex transactions of at least AED 100 million per tax period.

​Do free zone companies have to follow transfer pricing rules?

Yes. Free zone entities, including Qualifying Free Zone Persons, must follow the arm’s length principle. They can also apply for a domestic APA covering deals with related mainland companies.

Do companies under Small Business Relief have transfer pricing obligations?

Yes. The arm’s length principle still applies to related-party transactions, although they are not required to prepare a Master File or Local File.

Conclusion

For 2026, remember that having related party transactions does not always mean you need a Transfer Pricing Agreement or APA. Start by applying the arm’s length principle, then check your disclosure and documentation requirements based on the thresholds above. Reviewing your transfer pricing arrangements early will help you keep your documentation strong and respond quickly if the FTA requests more information. 

Recommended Articles:

How to Calculate Corporate Tax For Beginners in the UAE With an Example?

What is Small Business Relief Under UAE Corporate Tax?

When Does a Corporate Tax Return Need To Be Filed in the UAE?

Can UAE Businesses Pay Corporate Tax in Instalments? (2026 Guide)