If you have related-party transactions, and most UAE groups do, you now need to document them at arm's length. The thresholds, the disclosure form, and the methodologies all matter. Here is how to get it right.
What you'll learn
→ What counts as a related party → Documentation thresholds → The five accepted methodologies → Practical defence stepsWhat counts as a related party
Related parties include: anyone with 50% or more direct or indirect ownership, members of a Tax Group, subsidiaries within a corporate chain, joint ventures, partners in a partnership, and entities under common control. Connected persons include the owner, their relatives within the fourth degree, and entities owned by them.
Transactions to watch: management fees, shared service charges, intercompany loans, royalties, IP licensing, distribution arrangements, secondments, and any goods or services flowing across entities. Even an interest-free loan from a parent to a subsidiary triggers transfer pricing scrutiny.
Documentation thresholds
Master File and Local File are required if either: revenue exceeds AED 200M, or you are part of a multinational group with global revenue above AED 3.15B. The Disclosure Form is required if you have related-party transactions exceeding AED 500K aggregate in the period.
Even below these thresholds, every related-party transaction must be priced at arm's length and you must be able to substantiate the basis. The FTA can request supporting documentation for any transaction within five years of the filing date.
The five accepted methodologies
The OECD methods apply: Comparable Uncontrolled Price (CUP), Resale Price Method, Cost Plus, Transactional Net Margin Method (TNMM), and Profit Split. Each has appropriate use cases. CUP fits commodity-like services with public benchmarks. Cost Plus suits routine support services. TNMM is the workhorse for distribution and limited-risk service entities.
Pick the method most appropriate to the facts and document your reasoning. Inconsistency between methods used in different years is a red flag and triggers review. Most UAE SMEs converge on Cost Plus 5-10% for shared service charges and TNMM for distribution.
Practical defence steps
Three habits separate a clean TP file from a costly one: contemporaneous documentation (write the analysis at the time of the transaction, not three years later), benchmark studies refreshed every two years, and intercompany agreements signed before year-end with clear scope, term, and fee.
When the FTA opens a TP review, they expect to see the disclosure form filed, signed agreements in place, the methodology applied consistently, and the comparables study in your file. If any of those are missing, expect a tough negotiation.
This guide is general information, not professional advice. For situations that involve specific facts, talk to your accountant, or hire one of ours from the marketplace.