By Alia Noor, FCMA, CGMA, MBA
UAE Registered Tax Agent | Associate Partner – Taxation & Compliance Advisory, Ahmad Alagbari Chartered Accountants
Updated August 2026: This article was originally published on 11 May 2023 following the issuance of Ministerial Decision No. 97 of 2023. It has been reviewed to reflect subsequent UAE Corporate Tax and Transfer Pricing guidance.
The UAE Ministry of Finance issued Ministerial Decision No. 97 of 2023 on the Requirements for Maintaining Transfer Pricing Documentation for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
The UAE Corporate Tax regime applies the arm's length principle to transactions and arrangements between Related Parties and Connected Persons. The Transfer Pricing framework is intended to ensure that the pricing of such transactions is not influenced by the relationship between the parties and reflects terms that would have been agreed between independent parties under comparable circumstances.
Who Must Maintain a Master File and Local File?
Under Ministerial Decision No. 97 of 2023, a Taxable Person must maintain both a Master File and Local File where either of the following conditions is met:
- The Taxable Person's Revenue in the relevant Tax Period is AED 200 million or more; or
- The Taxable Person is part of a Multinational Enterprise (MNE) Group with total consolidated group Revenue of AED 3.15 billion or more in the relevant Tax Period.
Transactions to Be Included in the Local File
Where a Taxable Person is required to maintain a Local File, the Local File must include transactions or arrangements with the following Related Parties and Connected Persons:
a) A Non-Resident Person.
b) An Exempt Person.
c) A Resident Person that has made an election for Small Business Relief under Article 21 of the Corporate Tax Law and meets the conditions of that election.
d) A Resident Person whose income is subject to a different Corporate Tax rate from that applicable to the income of the Taxable Person.
Transactions That May Be Excluded from the Local File
Where a Taxable Person is required to maintain a Local File, transactions or arrangements with the following Related Parties and Connected Persons are not required to be included in the Local File:
a) A Resident Person, other than the Resident Persons specifically required to be included in the Local File as described above.
b) A natural person, provided that the parties to the transaction or arrangement are acting as if they were independent of each other.
c) A juridical person that is considered a Related Party or Connected Person solely by virtue of being a partner in an Unincorporated Partnership, provided that the parties to the transaction or arrangement are acting as if they were independent of each other.
d) A Permanent Establishment of a Non-Resident Person in the UAE, where its income is subject to the same Corporate Tax rate as that applicable to the income of the Taxable Person.
When Are Parties Considered Independent?
For the purpose of determining whether the relevant parties are acting as if they were independent of each other, the FTA will consider all relevant facts and circumstances.
When Parties May Be Considered Independent
The parties may be regarded as acting as if they were independent of each other where both of the following conditions are met:
a) The relevant transaction or arrangement is undertaken in the ordinary course of Business; and
b) The parties are not exclusively or almost exclusively transacting with each other.
When Parties May Not Be Considered Independent
Where the activities of one Person in relation to the transaction or arrangement are subject to detailed instruction or comprehensive control by the other Person, the parties will not be regarded as acting as if they were independent of each other.
Local File and Corporate Tax Return Disclosure Are Not the Same
Businesses should distinguish between the requirement to maintain a Master File and Local File and the requirement to disclose transactions with Related Parties and Connected Persons in the Corporate Tax Return.
These are separate Transfer Pricing compliance requirements. A business may therefore have Related Party or Connected Person disclosure obligations in its Corporate Tax Return even where it does not meet the AED 200 million Revenue or AED 3.15 billion MNE Group threshold for maintaining a Master File and Local File.
Related Party and Connected Person Disclosure Thresholds
For Corporate Tax Return purposes, the Related Party Transactions Schedule is required where the aggregate value of transactions with all Related Parties exceeds AED 40 million during the relevant Tax Period.
Once the AED 40 million threshold is exceeded, transactions within a particular category are required to be disclosed where the aggregate value of transactions in that category exceeds AED 4 million.
For Connected Persons, the relevant schedule is required where the aggregate value of payments or benefits to at least one Connected Person, together with their Related Parties, exceeds AED 500,000 during the relevant Tax Period. The applicable reporting requirements should then be considered for each Connected Person.
These disclosure thresholds are different from the AED 200 million / AED 3.15 billion thresholds applicable to maintaining the Master File and Local File.
Providing Transfer Pricing Documentation to the FTA
Where a Taxable Person is required to maintain a Master File and Local File, these documents are not submitted automatically with the Corporate Tax Return.
However, they must be provided to the Federal Tax Authority within 30 days following a request by the Authority, or by such other later date as directed by the Authority.
What Should Businesses Do?
Transfer Pricing compliance should not begin only when the Corporate Tax Return is due. Businesses should identify their Related Parties and Connected Persons, review transactions during the Tax Period, assess whether the applicable disclosure and documentation thresholds are met, and ensure that transactions are supported on an arm's length basis.
Importantly, businesses below the AED 200 million Local File threshold should not assume that Transfer Pricing requirements do not apply to them. The arm's length principle applies to transactions and arrangements with Related Parties and Connected Persons irrespective of whether a Master File and Local File are required.
Official References
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
- Ministerial Decision No. 97 of 2023 – Requirements for Maintaining Transfer Pricing Documentation
- Federal Tax Authority – Transfer Pricing Guide (CTGTP1)
- Federal Tax Authority – Corporate Tax Return Guide
Disclaimer
This article is intended for general informational and educational purposes only and does not constitute tax, legal or professional advice. UAE Corporate Tax and Transfer Pricing requirements should be assessed based on the specific facts and circumstances of each Taxable Person. Businesses should refer to the applicable legislation, Ministerial Decisions and guidance issued by the UAE Ministry of Finance and Federal Tax Authority, and seek professional advice where appropriate.
Tags
UAE Corporate Tax, UAE Transfer Pricing, Transfer Pricing, Ministerial Decision No. 97 of 2023, Master File, Local File, Related Parties, Connected Persons, Arm’s Length Principle, Corporate Tax Return, Transfer Pricing Documentation, FTA, Federal Tax Authority, UAE Ministry of Finance, MNE Group, Small Business Relief, Corporate Tax Compliance, UAE Tax, Tax Compliance, Xperts League
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