Understand UAE Corporate Tax Transfer Pricing In 2025 Dubai

Guide to Corporate Tax Transfer Pricing: With the introduction of Corporate Tax in the UAE, businesses are navigating new terms and requirements—one of which is Transfer Pricing. While it might sound technical, the concept is relatively simple. Let’s break it down for everyone in easy terms.  

What is Transfer Pricing?  

In business, companies often trade with others, but sometimes, these trades happen within the same group—between companies that are connected (commonly called related parties). For example:  

• ⁠  ⁠A company in Dubai might buy goods or services from its sister company in another country.  
• ⁠  ⁠A parent company might lend money to one of its subsidiaries. 

Transfer Pricing refers to how these transactions are priced. Why does this matter? Because governments want to ensure that these prices are fair and reflect what two unrelated companies would agree upon in the open market—this is called the arm’s length principle.  

 

Why is Transfer Pricing Important in the UAE?  

The UAE introduced Corporate Tax starting from June 2023, and with it came rules to ensure that businesses don’t manipulate profits by setting artificial prices in related-party transactions. For instance:  

• ⁠  ⁠A UAE company might lower its taxable profit by paying a higher-than-market price to a related company in a low-tax country.  

 

To prevent this, the UAE Corporate Tax Law includes Transfer Pricing rules to ensure that taxable profits in the UAE are correctly calculated. 

Who Does Transfer Pricing Apply To?  

Transfer Pricing applies to transactions between related parties. Related parties could include:  

• ⁠  ⁠A parent company and its subsidiary.  
• ⁠  ⁠Companies with common ownership or control.  
• ⁠  ⁠Directors, partners, or shareholders involved in multiple businesses.

 Key Requirements for Businesses in the UAE  

If your company engages in transactions with related parties, here’s what you need to know:  

1.⁠ ⁠Keep the Pricing Fair: Ensure that the prices charged between related parties are comparable to what independent businesses would agree upon in a similar situation.  

2.⁠ ⁠Maintain Proper Documentation: Businesses meeting specific thresholds need to prepare a Master File and a Local File that explain the group’s structure, related-party transactions, and pricing policies.  

3.⁠ ⁠Disclose Related-Party Transactions: When filing corporate tax returns, businesses must report transactions with related parties and connected persons. 

What Happens if You Don’t Comply? 

Failing to comply with Transfer Pricing rules can lead to penalties, audits, or adjustments to your taxable income by the Federal Tax Authority (FTA).  

 How Can You Prepare?  

1.⁠ ⁠Identify Related Parties: List all entities or individuals connected to your business.  

2.⁠ ⁠Review Transactions: Check if the pricing aligns with the arm’s length principle.  

3.⁠ ⁠Consult Experts: Transfer Pricing can get complex, so consider consulting tax advisors for compliance.

Final Thoughts  

Transfer Pricing is not just a tax compliance exercise—it’s about fairness and transparency in cross-border business. By understanding and implementing these rules, businesses can avoid potential tax issues and contribute to a robust, compliant tax environment in the UAE.  

Stay ahead of the game and make Transfer Pricing part of your business strategy—it’s not just about rules, it’s about doing business the right way.