Transfer pricing has moved from a topic that mid-tier firms could safely ignore to a routine compliance question for almost every UAE engagement with related-party transactions. Two and a half years after the introduction of the UAE transfer pricing rules, the population that is genuinely outside the regime is small. The population that is inside but has done little to nothing about it is large.
This guide is written for advisers running compliance work on UAE small and mid-sized businesses. It sets out which entities owe which transfer pricing obligations, what the disclosure form actually asks, the thresholds for the local file and master file, the practical approach for groups that fall below those thresholds, and the file we recommend per client. It is deliberately calibrated to the SME end of the market rather than to global multinational groups.
The rules in one paragraph
Article 34 of Federal Decree-Law No. 47 of 2022 requires that transactions and arrangements between related parties and connected persons be conducted at arm's length. Article 55 imposes documentation requirements - a disclosure form for in-scope taxpayers, and a local file and master file for taxpayers above prescribed thresholds. Ministerial Decision No. 97 of 2023 sets the thresholds and Ministerial Decision No. 134 of 2023 elaborates on the disclosure form.
Who counts as a related party
Related parties under Article 35 include, broadly, persons connected by ownership or control. The thresholds are 50% or more direct or indirect ownership, or de facto control. The definition reaches both upwards (parent companies, ultimate beneficial owners) and sideways (sister companies, common-control entities), and downwards (subsidiaries).
Connected persons under Article 36 are a separate, narrower category that includes the owner of the taxable person, a director or officer of the taxable person, and the relatives (within the second degree) of either, together with entities those persons control. Payments to connected persons - typically salaries to owner-directors, fees to family-controlled service entities - are subject to a market-value test and a deductibility limitation, separate from the broader related-party transfer pricing analysis.
The arm's length principle in practice
The arm's length principle requires that related-party transactions be priced as they would have been between independent parties under comparable circumstances. The UAE adopts the OECD transfer pricing methods - comparable uncontrolled price, resale price, cost plus, transactional net margin, profit split - with no Emirate-specific deviation.
For most SME engagements, the transactions that matter are intra-group services (management fees, IT, finance, HR), intra-group financing (loans and cash pooling), royalties and licence fees, and the cost-plus structure of shared back-office arrangements. The methodologies for these are well-established, and the documentation does not need to be elaborate to be defensible - but it does need to exist before the FTA asks for it.
The disclosure form - who has to file it
A disclosure form must be filed by any taxable person that has, in the tax period, related-party transactions or connected-person payments exceeding the thresholds set in Ministerial Decision No. 97 of 2023. The current thresholds are AED 40 million of aggregate related-party transactions in the period (with each individual category of transaction tested against a AED 4 million sub-threshold) and AED 500,000 of payments to a single connected person in the period.
Below these thresholds, no disclosure form is required. Above them, the form must be filed with the return. The form asks for summary information by transaction category - amounts, counterparties, transfer pricing method, and the rationale for the method chosen. It is not the local file, but it is the public-facing record of the firm's transfer pricing position.
Local file and master file - the higher thresholds
A local file and master file are required where the taxable person's revenue in the period is AED 200 million or more, or where the multinational enterprise group of which the taxable person is a member has consolidated group revenue of AED 3.15 billion or more in the prior period. Below those thresholds, the formal local file and master file are not mandatory.
For most SMEs in the UAE, the local file and master file thresholds are well above the entity's scale. The practical implication is that the SME population is, in the formal sense, subject only to the disclosure form (where applicable) and the arm's length principle as a substantive matter. That does not mean documentation can be dispensed with.
What to document when no local file is required
For an SME below the formal local file threshold but with material related-party transactions, the practical documentation we recommend is a short transfer pricing memo per group per year, covering:
- A description of the group structure and the related parties
- A list of the material related-party transactions and the amounts
- The transfer pricing method selected for each category, with a brief rationale
- The economic analysis - benchmarking, where available, or a reasoned cost-plus calculation
- The contemporaneous documents (intercompany agreement, invoices, board minutes) referenced by the memo
Connected-person payments - the deductibility limitation
Payments to connected persons - typically owner-directors and family-controlled entities - are deductible only to the extent they correspond to market value and are incurred wholly and exclusively for business purposes. Where the payment exceeds market value, the excess is non-deductible.
For owner-managed groups, this rule is the one that bites in practice. The owner-director's salary, the family-owned property leased to the business, and the management fee paid to the holding company are all in scope. The defence is contemporaneous documentation - an independent benchmark for the salary, a market valuation for the rent, a service agreement for the management fee - produced at the time, not after the event.
Intra-group financing - the area to be most careful about
Intra-group loans and cash pooling arrangements are the single most common area where SME transfer pricing analysis falls short. The arm's length interest rate depends on the credit standing of the borrower, the currency, the tenor, the security, and the prevailing market - and most SMEs default to a borrowed market rate without analysis.
A defensible approach is to start from a relevant benchmark (the borrower's standalone bank borrowing rate, where it exists, or a corporate bond yield curve for the borrower's implied credit rating) and apply a documented adjustment for the specific features of the loan. The analysis does not have to be long. It does have to exist.
The carve-out for Small Business Relief electants
A taxable person that has elected into Small Business Relief is exempt from the disclosure form, local file, and master file requirements for the relief period. The arm's length principle still applies as a substantive matter, and the deductibility limitation on connected-person payments still applies in the way the relief affects taxable income (which is to say, not at all, since taxable income is treated as nil), but the formal documentation obligations are switched off.
For SMEs at the edge of the AED 3 million revenue threshold, this is a relevant input into the Small Business Relief election decision. The reduction in transfer pricing administration is a real saving - but as noted in the Small Business Relief planning, do not let the underlying records drift, because the post-relief year will need a clean opening position.
When to bring in a specialist
A general practice firm can handle the standard SME transfer pricing positions - straightforward management fees, simple intercompany loans, standard royalties - with a sensible memo and benchmarking from available databases. The situations where a specialist is genuinely valuable are:
- Complex intangible structures, particularly IP migration into or out of the UAE
- High-value financing transactions or back-to-back lending structures
- Multinational groups close to or above the master file threshold
- Any client facing an actual FTA transfer pricing enquiry
- Restructurings, mergers, or acquisitions with material related-party flows
How Accupe helps
Accupe is the practice management layer that lets a firm run transfer pricing as a continuous workstream across an SME portfolio rather than a year-end scramble. Smart Boards govern the annual transfer pricing memo workflow per group, the encrypted client portal stores the intercompany agreements and benchmarking, AI document analysis with source citation accelerates the review of group structures, and the Compliance Radar surfaces clients whose related-party transactions are approaching the disclosure form thresholds. Accupe does not compute transfer pricing adjustments or file the disclosure form - your filing tool and EmaraTax do that - but the firm-side record is what keeps the analysis defensible and the documentation findable.