Related-Party Transactions Under UAE Corporate Tax: Is Your Business Transfer-Pricing Ready?

Corporate Tax compliance in the UAE is no longer only about calculating taxable profit and filing a return on time.

For businesses dealing with shareholders, group companies, directors, owners, subsidiaries, or other related entities, another important area requires attention: Transfer Pricing.

Under the UAE Corporate Tax framework, transactions between Related Parties and Connected Persons are generally expected to follow the arm’s length principle. In practical terms, this means the commercial terms should broadly reflect what independent parties would have agreed under comparable circumstances. (FTA UAE)

For businesses with group structures or frequent related-party transactions, overlooking this area can create unnecessary tax and compliance exposure.

Transfer Pricing Is Not Just for Multinational Companies

One of the most common misconceptions is that transfer pricing only matters when money moves between companies in different countries.

That is not the case.

UAE transfer-pricing rules can apply to transactions with Related Parties and Connected Persons whether they are located in the UAE mainland, a Free Zone, or another country. (FTA UAE)

This means even a UAE-based group conducting transactions entirely within the country should consider whether its arrangements are commercially supportable.

What Types of Transactions Should Businesses Review?

Related-party transactions can take many forms.

Common examples include:

• Management or consultancy fees between group companies

• Loans between a company and its shareholder or another group entity

• Interest charged on intercompany financing

• Purchase or sale of goods between related businesses

• Rental arrangements involving related parties

• Intellectual property or licensing charges

• Cost-sharing arrangements

• Director or owner-related payments

• Provision of administrative, technical, or professional services

Even an informal arrangement between two related companies can become relevant from a Corporate Tax perspective.

For example, the Federal Tax Authority specifically confirms that loans granted to or received from Related Parties or Connected Persons need to be assessed on an arm’s-length basis, including factors such as the interest rate and duration. (FTA UAE)

Why the Arm’s Length Principle Matters

Imagine two companies owned by the same shareholder.

Company A provides management services to Company B and charges AED 500,000 annually.

The key tax question is not simply whether an invoice exists.

The business should also be able to support why AED 500,000 represents an appropriate commercial charge.

Would an independent company have paid a comparable amount for the same services?

What services were actually provided?

How was the fee calculated?

Is there an agreement?

Can the business demonstrate the commercial rationale behind the arrangement?

These are the types of questions businesses should be prepared to address.

Documentation Can Become Just as Important as the Transaction

A transaction may have a genuine commercial purpose, but poor documentation can make it difficult to demonstrate that later.

Businesses dealing with Related Parties and Connected Persons should therefore maintain appropriate information supporting those transactions. The FTA notes that businesses are required to maintain information concerning such dealings, with additional transfer-pricing documentation requirements applying in certain circumstances. (FTA UAE)

Depending on the size and structure of the business, documentation may include:

• Intercompany agreements

• Invoices and supporting calculations

• Loan agreements

• Management-service agreements

• Evidence of services performed

• Pricing methodologies

• Financial records

• Comparable market information

• Transfer-pricing analysis

• Related-party transaction schedules

The objective is to create a clear audit trail demonstrating the commercial substance of the arrangement.

When Are Master File and Local File Requirements Relevant?

Not every business is required to prepare the same level of formal transfer-pricing documentation.

Under the current UAE rules, a Taxable Person is generally required to maintain a Master File and Local File where its revenue for the relevant Tax Period is AED 200 million or more, or where it is part of a multinational enterprise group meeting the applicable AED 3.15 billion consolidated group revenue threshold. (وزارة المالية - الإمارات العربية المتحدة)

However, falling below these thresholds should not automatically be interpreted as meaning transfer pricing can be ignored.

The underlying arm’s-length principle can still be relevant to Controlled Transactions.

Related-Party Compliance Should Start Before Year-End

A frequent mistake is reviewing related-party transactions only when the Corporate Tax return is being prepared.

By that stage, the company may already have an entire financial year of transactions recorded without sufficient agreements, calculations, or supporting evidence.

A better approach is to identify related-party arrangements throughout the year.

Businesses should periodically ask:

Who are our Related Parties and Connected Persons?

What transactions are taking place with them?

Are the commercial terms properly documented?

Can we explain how the pricing was determined?

Do the accounting records match the underlying agreements?

This makes year-end Corporate Tax compliance considerably more manageable.

Why This Matters for Growing UAE Businesses

As UAE businesses expand, group structures tend to become more complex.

An entrepreneur may initially operate one company and eventually establish a holding company, additional operating entities, international subsidiaries, investment vehicles, or Free Zone entities.

Money, services, staff, intellectual property, and financing may then begin moving between those entities.

Without a structured approach, related-party transactions can quickly become one of the more complicated areas of Corporate Tax compliance.

Transfer pricing therefore should not be viewed only as a tax calculation exercise.

It forms part of a broader tax governance and documentation framework.

How Devenir Corporate Services Can Assist

At Devenir Corporate Services, we support businesses in navigating UAE Corporate Tax and ongoing tax-compliance requirements.

Our team can assist businesses in reviewing their accounting records and related-party transactions, identifying documentation requirements, coordinating Corporate Tax compliance, and ensuring that important transactions are properly supported before the filing stage.

For companies with multiple shareholders, subsidiaries, group entities, international operations, or regular intercompany transactions, proactive review can significantly reduce future compliance complications.

Don’t Wait Until the Corporate Tax Return Is Due

Related-party transactions may look routine during the year.

From a tax-compliance perspective, however, the pricing, commercial substance, documentation, and accounting treatment behind those transactions can all matter.

Identify the relationships. Document the transactions. Support the pricing. Stay prepared.

Contact Devenir Corporate Services to discuss your UAE Corporate Tax and Transfer Pricing compliance requirements.

This gives the content calendar a different positioning from the recent VAT filing mistakes, Corporate Tax record-keeping, filing errors, deregistration, and general tax-compliance topics.