UAE Transfer Pricing: What Businesses Must Document and Defend in 2026

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UAE transfer pricing to OECD standards is now core compliance - what businesses must document and defend.

Federal Decree-Law No. 47 of 2022 makes the arm's-length principle a statutory requirement for all UAE related-party and connected-person transactions.
2026 is described by advisers as a mature compliance phase, with the Federal Tax Authority expected to use data analytics and international information exchange to identify audit targets.
A transfer pricing disclosure form is required for all related-party transactions, filed within nine months of the financial year end.
Local File obligations apply where UAE entity revenue reaches AED 200 million; Master File obligations apply where group revenue reaches AED 3.15 billion.
UAE rules apply to domestic related-party transactions as well as cross-border ones - mixed mainland and free-zone groups are directly in scope.
Cabinet Decision No. 129 of 2025 introduces a revised penalty regime from April 2026, with post-audit disclosures attracting a fixed 15 percent penalty plus monthly charges.

BEPS Action 13 and the UAE's Maturing Compliance Landscape

The UAE's adoption of the OECD Transfer Pricing Guidelines - including the BEPS (Base Erosion and Profit Shifting) Action 13 three-tier documentation model - has redefined what compliance means for businesses with related-party structures. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses embedded the arm's-length principle as a statutory requirement, giving the Federal Tax Authority (FTA) explicit powers to adjust taxable income where intercompany pricing falls short of market norms.

As Khaleej Times reports, 2025 marked the transition from awareness to implementation, and 2026 is widely described by advisers as a more mature compliance phase. Groups that treated the early corporate tax years as a soft-landing period now face a higher risk of FTA enquiry, with data analytics, cross-filing reconciliations and international information exchange all available as audit tools.

Legal Foundations: What the Law Requires

The UAE's transfer pricing rules sit within Federal Decree-Law No. 47 of 2022, which took effect from June 2023. All related-party and connected-person transactions must reflect the arm's-length principle - meaning prices must match what independent parties would agree in comparable circumstances. Where prices fall short, the FTA can adjust a taxpayer's taxable income accordingly.

The framework closely tracks the OECD Transfer Pricing Guidelines and the BEPS Action 13 architecture, but with UAE-specific thresholds and additional disclosure requirements that go beyond the OECD baseline in some areas. Businesses cannot assume that OECD compliance in other jurisdictions automatically satisfies UAE obligations - local tailoring creates distinct exposures.

Documentation Obligations and 2026 Thresholds

UAE transfer pricing documentation comprises several components, each with its own threshold and timeline. A TP disclosure form is required for all related-party transactions and must be filed within nine months of the financial year end, in line with corporate tax return deadlines.

A Local File - a detailed analysis of material transactions for each UAE entity - is required where annual entity revenue reaches at least AED 200 million. A Master File, providing a group-wide overview, is required where consolidated group revenue equals or exceeds AED 3.15 billion. Both documents must be provided to the FTA within 30 days of a request. Country-by-Country Reporting (CbCR) - a summary of a multinational group's income, taxes and activities across jurisdictions - applies to large multinational groups on a similar basis. Separately, connected-person disclosures apply where payments or benefits to an individual exceed AED 500,000 per year.

Businesses below formal documentation thresholds should not assume they are exempt from scrutiny. Advisory commentary emphasises that the arm's-length principle applies to all related-party dealings, and the FTA can examine the commerciality of pricing even where a formal Local File is not yet mandated.

Benchmarking: How the FTA Assesses Pricing Evidence

Benchmarking analysis - comparing intercompany prices or margins against those of independent comparable companies - is central to transfer pricing defence in the UAE. Guidance for UAE taxpayers describes a search hierarchy that starts with local UAE comparables, widens to regional GCC or Middle East data, and only moves to global datasets when domestic sources are insufficient.

The FTA is understood to favour results expressed as an interquartile range. Transactions falling outside the 25th to 75th percentile are considered high-risk and face a higher likelihood of upward adjustment. This effectively requires taxpayers to position their tested margins or prices convincingly within market-conform ranges, supported by clear functional, risk and asset analyses. Benchmarking studies should be contemporaneous - prepared at the time transactions are structured - rather than reconstructed retrospectively.

Not Just a Multinational Issue: Domestic Transactions in Scope

A common misconception is that transfer pricing is exclusively a cross-border concern. UAE rules apply to domestic related-party transactions as well, wherever one or more parties benefit from a different tax position - for example, where one entity operates in a free zone and another operates on the mainland.

Intra-UAE transactions between taxed and exempt entities, or between entities with different access to preferential rates, must be priced and documented on arm's-length terms. Medium-sized local groups with mixed mainland and free-zone structures face the same fundamental obligations as larger multinationals. Advisers warn that misaligned pricing between a free-zone entity and a related mainland company could inadvertently dilute qualifying-income status, undermining the commercial rationale for the free-zone structure itself.

Penalties and the Enforcement Outlook

Cabinet Decision No. 129 of 2025, effective 14 April 2026, introduces a revised penalty framework for transfer pricing failures. Voluntary disclosures correcting prior understatements attract a monthly 1 percent penalty on the tax difference, creating a direct and escalating cost to delayed self-correction. Post-audit disclosures carry a fixed 15 percent penalty on top of the same monthly charge, while failure to maintain required records can attract penalties of up to AED 10,000 per instance.

Advisory firms, including BCL Globiz - which received a transfer pricing advisory excellence award at the GATE Summit Dubai 2026 - describe transfer pricing as one of the main areas where the FTA is likely to deploy data analytics and international information-exchange mechanisms to identify audit targets. Businesses that have not yet mapped related-party transactions, reviewed documentation positions and aligned intercompany agreements with actual commercial conduct should treat this as an immediate priority.

Advance Pricing Agreements: The Next Frontier

Looking ahead, the UAE is moving towards an advance pricing agreement (APA) framework. An APA allows a taxpayer to agree a pricing methodology with the FTA upfront for key transactions, providing certainty and reducing future dispute risk. Early coverage from Handle.ae of the UAE's first APA roadmap indicates that the mechanism will require significant preparatory work and data disclosure.

Only groups with strong documentation foundations and well-organised records are likely to be positioned to leverage APAs effectively once the framework is fully implemented. This reinforces the broader message from advisers: building robust transfer pricing systems now serves both immediate compliance and longer-term strategic flexibility.

What Clients are Asking their Advisors

What does the arm's-length principle mean for UAE businesses?

The arm's-length principle requires transactions between related companies to be priced as if they were between independent parties in comparable circumstances. Under Federal Decree-Law No. 47 of 2022, this standard applies to all related-party and connected-person dealings in the UAE. Where pricing does not meet this standard, the Federal Tax Authority can adjust a company's taxable income.

When do UAE companies need to file transfer pricing documentation with the FTA?

A transfer pricing disclosure form must be filed within nine months of the financial year end for all companies with related-party transactions. Local File and Master File documentation does not need to be submitted proactively, but must be provided within 30 days if the FTA requests it. Thresholds of AED 200 million in entity revenue (Local File) and AED 3.15 billion in group revenue (Master File) determine which documents are formally required.

How do UAE transfer pricing rules differ from OECD guidelines?

The UAE closely follows the OECD Transfer Pricing Guidelines and the BEPS Action 13 three-tier documentation model, including the same benchmarking methods and documentation structure. Key differences include a relatively low Master File threshold compared with some OECD jurisdictions, and additional TP disclosure form requirements that apply even where a formal Local File is not yet mandated. The result is that UAE rules generate more proactive reporting to the FTA than the OECD baseline alone would require.

What penalties apply for transfer pricing non-compliance in the UAE in 2026?

Under Cabinet Decision No. 129 of 2025, effective April 2026, voluntary disclosures correcting prior errors attract a 1 percent monthly penalty on the tax difference. Post-audit disclosures carry a fixed 15 percent penalty plus the monthly charge, while record-keeping failures can attract penalties of up to AED 10,000 per instance. These measures make delayed or incomplete transfer pricing documentation increasingly costly once the FTA initiates an enquiry.