The UAE’s transfer pricing (TP) regime was launched in 2024 and while in line with the OECD arm’s-length standard model, the TP rules are distinctive in certain ways. 

Namely, the UAE has extended the definition of related parties to prevent taxpayers from avoiding taxes under the new rules. The inclusion of related parties up to the fourth degree of kinship and the application of the arm’s-length principle to payments made to connected persons ensure that business owners cannot reduce the profitability of their businesses by paying remuneration to the family members.  

Furthermore, extra TP rules for companies with operations in free zones means that the UAE taxpayers must make sure that transactions with related entities inside the country’s free zones comply with those TP rules. Crucially, transactions with related parties must be at arm’s-length in both substance and form and free zone entities cannot exploit related party transactions to artificially reduce their taxable income.  

TP regime is one of the most technical fields of the taxation. Hence, the UAE released a corporate tax guide in November 2024, which includes thresholds for reporting transactions, required adjustments for non-market value transactions, free-zone documentation requirements and details of certain gains or losses from related-party transactions. 

Therefore, to comply with complex UAE TP rules, the businesses will need to be more organised and to have respective systems, structures and procedures in place. 

Do you have a company in the UAE? Do you want to know whether TP rules apply also to you? Do you need to prepare TP documentation? Call us at +971 521 521 330 or send us email at office@alphaprimedwc.ae. We focus on tax and are 10 years in Dubai helping and assisting our clients. We are here for you.