Insights Corporate Tax
Master File and Local File UAE: When Transfer Pricing Documentation Actually Bites
Local file and master file UAE thresholds: the AED 200m and AED 3.15bn tests, what each document contains, the 30-day FTA window and CbCR reporting.
Key takeaways
- Arm's length principle applies to every UAE business with related-party transactions, regardless of size
- Master File and Local File required where revenue ≥ AED 200 million OR group consolidated revenue ≥ AED 3.15 billion
- CbCR required for UAE-headquartered groups with consolidated revenue ≥ AED 3.15 billion (EUR 750 million)
- Files must be ready before the FTA requests them — 30-day delivery window after request
- Disclosure form filed with the corporate tax return for material related-party transactions
- OECD BEPS Action 13 aligned — the UAE files reference OECD Transfer Pricing Guidelines for interpretation
The Master File and Local File UAE documentation rules are the part of transfer pricing that trips up the most groups — not the arm’s length principle itself, but the obligation to keep the two documents ready on a contemporaneous basis, before an FTA request ever lands. With Federal Decree-Law 47 of 2022 live and Ministerial Decision 97 of 2023 setting the framework, every UAE business with related-party transactions has an arm’s length obligation, and larger businesses have a formal Master File and Local File obligation on top. The arm’s length principle applies even to a sole shareholder making a single loan to their own free zone company.
This guide covers the Master File and Local File thresholds, what each document must contain, Country-by-Country Reporting under OECD BEPS, and the FTA filing window. If you need hands-on help building the documentation set, our transfer pricing advisory in the UAE team prepares Local Files and disclosure forms for groups and SMEs, alongside our wider corporate tax services.
What Article 34 actually asks of you
Article 34 of the Federal Decree-Law says any transaction between related parties must be priced on terms that would have applied between independent parties dealing at arm’s length. The article covers:
- Sales and purchases of goods between group entities
- Services rendered between group entities (management, IT, R&D, treasury)
- Royalties and licensing payments
- Intra-group financing — loans, guarantees, cash pooling
- Cost contribution arrangements
- Any other transaction where the parties are related under Article 35
The arm’s length result is set by one of the five OECD-recognised methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), or Profit Split. The FTA transfer pricing guide endorses these directly.
AED 200M / AED 3.15B
The two Master File and Local File thresholds — own revenue of AED 200 million OR membership of a multinational group with consolidated revenue of AED 3.15 billion
Master File and Local File — who has to build them, and what goes in
The UAE transfer pricing documentation threshold
The UAE corporate tax transfer pricing documentation requirements sit on two tests. People search for this pair in both orders — local file and master file, or master file and local file — and it makes no difference; they are two halves of one obligation and the same threshold switches both on. Ministerial Decision 97 of 2023 sets the Master File and Local File threshold at:
- The taxable person’s own revenue for the relevant tax period is AED 200 million or more, OR
- The taxable person is a member of a multinational enterprise group whose consolidated revenue is AED 3.15 billion or more
If either test is met, the files must be maintained on a contemporaneous basis and submitted to the FTA within 30 days of a request — in practice, that means having them ready by the time the corporate tax return is filed, nine months after the end of the tax period.
What the Master File covers
The Master File describes the multinational group as a whole. The OECD BEPS Action 13 framework, which the UAE adopts by reference, requires the Master File to cover:
- The group’s organisational structure and legal ownership chart
- Description of the group’s business — products, services, supply chain
- The group’s intangibles — DEMPE analysis (development, enhancement, maintenance, protection, exploitation)
- The group’s intercompany financial activities
- The group’s financial and tax positions — consolidated financial statements and a list of advance pricing arrangements
The Master File is typically prepared at headquarter level for the whole group and shared with each constituent UAE entity for their own filing.
What the Local File covers
The Local File describes the UAE taxable person specifically:
- Management structure and reporting lines of the local entity
- Business strategy of the local entity
- Material related-party transactions — value, counterparty, jurisdiction
- Functional analysis — functions performed, assets used, risks assumed
- Transfer pricing method selected and reason for the selection
- Comparability analysis and benchmarking study
- Financial information for the local entity
The Local File is country-specific. A UAE Local File is not interchangeable with a Local File prepared for the same group in another jurisdiction.
Country-by-Country Reporting, if you’re big enough to be in scope
Country-by-Country Reporting is the third layer of the OECD BEPS Action 13 framework. The UAE adopted CbCR through Cabinet Decision 44 of 2020 and continues to operate it under the corporate tax regime. CbCR reporting sits above the local file and master file rather than replacing either — a group large enough to file a country-by-country report is, by definition, already inside the master file and local file population, so the three documents get built together rather than in sequence.
Who actually files
UAE-headquartered multinational groups whose consolidated revenue is EUR 750 million or more (approximately AED 3.15 billion at typical exchange rates) must file an annual CbCR report. Only the Ultimate Parent Entity files, and only where it is tax-resident in the UAE. The amended UAE regime (Cabinet Resolution No. 44 of 2020) has no surrogate or secondary local-filing mechanism, so a UAE constituent that is not the UPE files nothing here — even where the parent’s jurisdiction does not exchange CbC reports with the UAE.
What the CbCR reports
For each jurisdiction in which the group operates, the CbCR discloses:
- Total revenue split between unrelated and related parties
- Profit (loss) before income tax
- Income tax paid (cash basis)
- Income tax accrued (current year)
- Stated capital
- Accumulated earnings
- Number of employees
- Tangible assets other than cash and cash equivalents
The report also lists each constituent entity, its tax jurisdiction, jurisdiction of organisation, and main business activities.
Notification and filing, the practical bit
Only the UAE-resident Ultimate Parent Entity of a UAE-headquartered MNE group files with the Ministry of Finance — an annual CbCR notification (due by the last day of the group’s reporting fiscal year) and the CbC report itself (within 12 months of the end of the reporting fiscal year). Under the current regime a UAE constituent that is not the UPE files nothing — no notification and no report — even where its parent’s jurisdiction does not exchange CbC reports with the UAE. Our dedicated guide sets out the full CbCR filing deadline for a UAE holding company and the penalties for missing either date.
CbCR information is exchanged with treaty partners through the OECD’s automatic exchange mechanism — relevant for groups operating in jurisdictions with which the UAE has signed the CbC Multilateral Competent Authority Agreement.
EUR 750M
The Country-by-Country Reporting threshold — UAE-headquartered groups with consolidated revenue at or above this level file annually with the Ministry of Finance
What Ministerial Decision 97 actually says, clause by clause
The thresholds get quoted constantly and the rest of Ministerial Decision No. 97 of 2023 almost never does — which is a problem, because the rest of it decides what goes into the local file. The Decision was issued on 27 April 2023 and takes effect the day following publication.
Article 2(1) sets the two entry tests, and the word “either” is doing the work. Meet one and the obligation attaches; you do not need both.
| Art. 2(1) test | Threshold | Measured on |
|---|---|---|
| (a) Constituent company of a multinational enterprises group, as defined in Cabinet Decision No. 44 of 2020 | Total consolidated group revenue of AED 3,150,000,000 or more in the relevant tax period | The group’s consolidated revenue |
| (b) The taxable person in its own right | Revenue of AED 200,000,000 or more in the relevant tax period | The taxable person’s own revenue |
Both files are then maintained “in accordance with Clause (2) of Article (55) of the Corporate Tax Law”. If you see figures materially below these quoted as the master-file and local-file thresholds — and figures an order of magnitude out do circulate in UAE commentary — check them against Article 2(1) before you plan to them. The disclosure-form threshold is a separate and much lower test, and conflating the two is the most common error on this topic.
Article 2(2) then lists the counterparties whose transactions must appear in the local file. This is the clause that surprises groups who assumed a local file covers everything.
| Art. 2(2) — must be included in the local file | Why it is there |
|---|---|
| (a) A non-resident person | Cross-border pricing is the core risk |
| (b) An exempt person | Income shifted to an exempt entity escapes the 9% |
| (c) A resident person that has made an election under Article 21 and meets its conditions | Small Business Relief electors sit outside the normal base |
| (d) A resident person whose income is subject to a different Corporate Tax rate | Captures the QFZP-to-mainland flow at 0% versus 9% |
Article 2(3) is the mirror image, and it is why a purely domestic group with one rate is far less exposed than its size suggests.
| Art. 2(3) — must NOT be included in the local file | Condition attached |
|---|---|
| (a) Resident persons other than those in Art. 2(2)(b), (c) and (d) | None — ordinary same-rate residents are simply out |
| (b) A natural person | Only where the parties act as if independent of each other |
| (c) A juridical person related solely by being a partner in an unincorporated partnership | Only where the parties act as if independent of each other |
| (d) A permanent establishment of a non-resident in the UAE taxed at the same rate as the taxable person | None |
The “acting as if independent” carve-out in Article 2(3)(b) and (c) is not self-certifying. Article 2(4) sets two cumulative conditions: the transaction must be undertaken in the ordinary course of business, and the parties must not be exclusively or almost exclusively transacting with each other. Article 2(5) then removes the carve-out entirely where one party’s activities are subject to detailed instruction or comprehensive control by the other. Article 2(6) leaves the FTA to weigh all relevant facts and circumstances in deciding.
Read together, those three clauses describe a very familiar UAE structure: the founder-owned mainland company whose only real customer is the founder’s other company, on terms nobody negotiated. That arrangement fails Article 2(4)(b) on its face, and the transactions come back into the local file.
The deadlines and the paper trail, in one place
Three separate instruments impose clocks on the same file, and they run from different events.
| Obligation | Deadline | Source |
|---|---|---|
| Produce the master file and local file to the FTA after a request | 30 days following the request, or a later date the FTA directs | FDL 47/2022, Art. 55(3) |
| Provide information supporting the arm’s length nature of related-party transactions on request | 30 days following the request, or a later date directed | FDL 47/2022, Art. 55(4) |
| File the disclosure of related-party transactions with the tax return | With the return, in the form the FTA prescribes | FDL 47/2022, Art. 55(1) |
| File the Corporate Tax return itself | Within 9 months of the end of the tax period | FDL 47/2022, Art. 53(1) |
| Keep the records supporting the return | 7 years following the end of the tax period | FDL 47/2022, Art. 56(1) |
| CbCR notification by a UAE-resident ultimate parent entity | No later than the last day of the group’s reporting fiscal year | CD 44/2020, Art. 2(1) |
| CbCR report submission | No later than 12 months after the last day of the reporting fiscal year | CD 44/2020, Art. 4(1) |
| Retain CbCR supporting documents and information | At least 5 years after the date of reporting | CD 44/2020, Art. 8(1)(b) |
The thirty-day windows in Article 55(3) and (4) are the whole argument for contemporaneous documentation. Thirty days is not enough time to run a functional analysis, build a benchmarking set and write it up defensibly. It is comfortably enough time to review, date and upload a file that already exists.
CbCR carries its own penalty schedule, and it is set in AED directly in Cabinet Decision No. 44 of 2020 rather than in the general Corporate Tax penalty framework.
| CbCR failure | Administrative penalty | Source |
|---|---|---|
| Ultimate parent entity fails to notify within the deadline | AED 1,000,000, plus AED 10,000 for each day the failure continues, capped at AED 250,000 | CD 44/2020, Art. 8(2) |
| Failure to keep the documents and information for at least 5 years after reporting | AED 100,000 | CD 44/2020, Art. 8(1)(b) |
| Failure to provide the Competent Authority with required information | AED 100,000 | CD 44/2020, Art. 8(1)(c) |
| Failure to report completely and accurately | AED 50,000 minimum to AED 500,000 maximum | CD 44/2020, Art. 8(1)(d) |
| Overall cap for a reporting fiscal year | AED 1,000,000, excluding the specified daily penalties | CD 44/2020, Art. 8(3) |
| Grace period before penalties apply | 14 business days from written notification of the violation | CD 44/2020, Art. 9(2) |
The fourteen-business-day grace period in Article 9(2) is worth knowing: the Competent Authority notifies the violation in writing and must allow that window to remedy it before the penalties in Article 8 are applied. It is a genuine second chance, and it is short.
The disclosure form catches almost everyone
In addition to the Master File and Local File, every UAE taxable person with material related-party transactions completes a transfer pricing disclosure form as part of the corporate tax return on EmaraTax. The threshold for inclusion in the disclosure form is significantly lower than the AED 200 million Master File threshold — most SMEs with intra-group flows will need to complete the disclosure even if a full Master File is not required.
The disclosure form captures:
- Nature of the related-party transaction (goods, services, royalties, financing)
- Counterparty name and jurisdiction
- Value of the transaction
- Transfer pricing method applied
- Whether a benchmarking study supports the pricing
The disclosure form is part of the corporate tax filing. Inaccurate disclosure is an incorrect return for the purposes of Cabinet Decision 75 of 2023 penalties.
When the rules stretch to connected persons
The transfer pricing rules extend beyond related parties to connected persons. Under Article 36 of the Federal Decree-Law, payments to a connected person are deductible for corporate tax only to the extent they would have been paid at arm’s length. Connected persons include:
- Owners of the taxable person and their relatives
- Directors and officers and their relatives
- Partners in an unincorporated partnership and their relatives
A common pattern is a free zone or mainland company that pays a management fee or rent to its individual owner. Without arm’s length documentation, the deduction may be challenged. The defensive position is a connected-person policy that prices these flows consistently and is documented in the same way as group transfers.
Which OECD method fits which transaction
Each of the five OECD-recognised methods has a job it’s best at. In a UAE SME context, one of them does most of the heavy lifting — but it helps to know why the others exist before you default to it.
CUP (Comparable Uncontrolled Price)
Used where a comparable open-market price exists — typically applied to commodity sales, simple distribution mark-ups, or licensed software royalties where market benchmarks are available.
Resale Price Method
Used for distributors. Starts with the resale price to an independent customer and works back through an arm’s length gross margin to set the related-party purchase price.
Cost Plus
Used for low-risk service providers and contract manufacturers. Adds an arm’s length mark-up to the costs incurred.
Transactional Net Margin Method (TNMM)
The workhorse for most UAE SME transfer pricing files. Compares the net operating margin of the tested party to a benchmark set of independent comparables. Most management fee, support service and routine distribution arrangements are tested under TNMM with operating margin as the profit-level indicator.
Profit Split
Used where both parties contribute unique intangibles — typically in joint development or shared trading book arrangements. Less common in SME files.
The arm’s length analysis is only as strong as the comparability study behind it. A poorly chosen method or a thin benchmark set leaves the FTA room to substitute their own analysis.
Refresh it every year, or you’ll regret it
A transfer pricing file is a living document, and the annual refresh runs through six things. You confirm the intercompany agreements still reflect operating reality. You capture any change in functions, assets or risks during the period. You re-run the benchmarking study, updating the comparable company data and checking the arm’s length range still supports the tested margin. You reconcile to the management accounts to see the audited results sit within or close to that range. You fold any structural change, M&A activity or new related-party flow into the Master File and Local File. And you complete the disclosure form so it reconciles to the values in the corporate tax return.
The refresh runs alongside the accounting and bookkeeping year-end close and the audit. Running it on a separate timeline that finishes after the audit signs off costs more and carries more risk.
What it costs you if the file isn’t there
Cabinet Decision 75 of 2023 sets administrative penalties for transfer pricing failures, including:
- Failure to maintain transfer pricing records — AED 10,000 for a first offence, AED 20,000 for a repeated offence within 24 months
- Failure to submit the Master File or Local File within 30 days of an FTA request — fixed penalty per file
- Incorrect transfer pricing disclosure form on the corporate tax return — percentage-based penalty on the underpayment
- Transfer pricing adjustment by the FTA — back-tax at the 9% corporate tax rate plus late-payment penalties
The administrative penalty is the smaller cost. The larger exposure is the FTA’s right to substitute their own arm’s length result, which can re-price years of related-party flows and trigger material back-tax.
If you’re claiming QFZP, the TP file is your defence
For free zone groups, transfer pricing interacts directly with the Qualifying Free Zone Person regime. Article 18 of the Federal Decree-Law requires the QFZP to comply with the transfer pricing rules in Articles 34 and 55 — a transfer pricing breach is also a QFZP breach, with the 5-year clawback consequences set out in our de minimis worked example.
Three issues come up again and again. Headquarter services charged to related parties need evidence the service was genuinely rendered and priced at arm’s length, not just booked. Treasury and financing services need an interest rate benchmark and a credit-worthiness analysis to stand up. And intra-group royalty arrangements need DEMPE alignment behind a licence model that an auditor can follow.
A QFZP that fails the transfer pricing test on a material flow risks losing the 0% rate entirely for the period plus the following four. The transfer pricing file is the audit trail that defends the rate.
Where the treaty network actually helps
For groups with cross-border related-party flows, the UAE’s double taxation treaty network provides Mutual Agreement Procedure (MAP) and Advance Pricing Arrangement (APA) avenues for resolving transfer pricing disputes with treaty partners. The MAP framework allows the UAE FTA and a partner tax administration to negotiate a bilateral adjustment that eliminates double taxation.
APAs — bilateral or unilateral agreements that lock in an arm’s length method for a fixed period — are increasingly used by larger UAE groups to provide certainty on material related-party flows. The FTA’s APA programme is in active operation.
Building the file from scratch, end to end
For a UAE SME building a transfer pricing file from scratch, the practical workflow is:
- Identify all related parties under Article 35 — group entities and individuals
- Map every related-party transaction by category — goods, services, royalties, financing, other
- Test materiality — flag transactions for full documentation versus disclosure-only treatment
- Draft or refresh intercompany agreements for each material flow
- Run the functional analysis for each material flow
- Select the transfer pricing method per flow with a documented rationale
- Commission or refresh benchmarking studies for the TNMM and Cost Plus flows
- Draft the Local File covering the UAE entity
- Obtain the Master File from the group HQ or draft locally if the UAE entity is the group HQ
- Complete the transfer pricing disclosure form for the corporate tax return
- File the CbCR notification and report with the Ministry of Finance only if the UAE entity is the ultimate parent of a group at or above the EUR 750 million threshold
- Sign off the file and store with the audit working papers ready for FTA request
Most SME files take six to eight weeks to build from scratch and two to three weeks to refresh each year after that. Trying to do it under time pressure once an FTA request has already landed? Not realistically possible at a standard that holds up.
How Velmont Crest helps
Velmont Crest is a DED-licensed accounting practice providing preparation and advisory support — we are not an FTA-registered tax agent. Our transfer pricing involvement covers:
- Related-party transaction mapping and materiality assessment
- Drafting and review of intercompany agreements
- Functional analysis workshops with operational and finance teams
- Local File drafting aligned with the OECD framework
- Disclosure form preparation alongside the corporate tax return filing
- Coordination with specialist benchmarking providers for comparability studies
- Liaison support for FTA requests and audit responses
For a 30-minute review of your transfer pricing readiness, book a consultation or WhatsApp the team.
This article is general guidance for UAE businesses. It is not transfer pricing advice for any specific entity. The Master File and Local File thresholds, CbCR rules, penalty regime and OECD alignment are governed by Federal Decree-Law 47 of 2022, Ministerial Decision 97 of 2023, Cabinet Decision 44 of 2020, Cabinet Decision 75 of 2023 and the FTA’s published guidance — verify against the live text and your own facts before relying on any position.
Frequently asked questions
- Who must prepare a Master File and Local File in the UAE?
- You're in under Ministerial Decision 97 of 2023 if your own revenue for the tax period hit AED 200 million or more, or if you were a constituent company of a multinational group whose consolidated revenue was AED 3.15 billion or more. The two tests are independent, so meeting either one lands you the obligation. And because the documentation has to be contemporaneous, the sensible discipline is to have the files finished by the time you file the corporate tax return, not assembled whenever the FTA happens to ask for them.
- What is the FTA transfer pricing disclosure form?
- It's a section of the corporate tax return on EmaraTax, and it's the part that catches almost everyone. You complete it for any period in which you had material related-party transactions or payments to connected persons, setting out the nature, value and pricing method behind each one. The threshold for getting pulled in sits in the FTA's procedural guidance and is far below the AED 200 million Master File line — so plenty of SMEs file the disclosure without ever needing a full Master File.
- What is the difference between the local file and the master file?
- Scope. The master file describes the multinational group as a whole — its structure, where value is created, the intangibles it owns, how it finances itself, and its global transfer pricing policies. The local file zooms in on the UAE entity: its own related party transactions, the functional analysis of who does what and who bears which risk, the financial data, the benchmarking, and the reasoning behind the method chosen for each transaction. Whichever order you hear them in, they are two halves of one obligation and the same AED 200 million or AED 3.15 billion test switches both on at once.
- What is Country-by-Country Reporting in the UAE?
- CbCR is the OECD BEPS Action 13 layer, adopted here through Cabinet Decision 44 of 2020 and carried into the corporate tax regime. UAE-headquartered groups with consolidated revenue of EUR 750 million (roughly AED 3.15 billion) file an annual report breaking down revenue, profit, tax paid and substance indicators by jurisdiction. Notification and filing both go to the Ministry of Finance electronically.
- What is the FTA filing window for transfer pricing documentation?
- There are really two clocks, and people mix them up all the time. The binding one: once the FTA issues a written request during an audit, you have 30 days to hand the Master File and Local File over. The other is best practice — because the documentation has to be contemporaneous, you should have it finished by the time you file the corporate tax return, nine months after the period ends, rather than assembling it once a request lands. Miss the 30 days and you're looking at administrative penalties under Cabinet Decision 75 of 2023, plus a much weaker arm's length defence on whatever adjustment follows.
- Which related-party transactions have to go into the UAE local file?
- Article 2(2) of Ministerial Decision 97 of 2023 lists four categories that must be included: a non-resident person, an exempt person, a resident person that has elected under Article 21 of the Corporate Tax Law and meets that election's conditions, and a resident person whose income is subject to a different Corporate Tax rate from yours. That last one captures the free-zone-to-mainland flow, because a Qualifying Free Zone Person at 0% and a mainland company at 9% are on different rates. Article 2(3) then excludes ordinary resident counterparties on the same rate, natural persons and unincorporated-partnership partners — but the last two only where the parties genuinely act as if independent of each other.
- When does the natural-person exclusion from the local file stop applying?
- Article 2(4) of Ministerial Decision 97 of 2023 sets two cumulative conditions for treating parties as acting independently: the transaction must be undertaken in the ordinary course of business, and the parties must not be exclusively or almost exclusively transacting with each other. Fail either and the exclusion falls away. Article 2(5) removes it outright where one party's activities are subject to detailed instruction or comprehensive control by the other, and Article 2(6) leaves the FTA to weigh all relevant facts and circumstances. In practice a UAE company whose only real customer is its owner's other company will not clear the second condition, and those transactions come back into the local file.
- What OECD framework does UAE transfer pricing follow?
- The OECD Transfer Pricing Guidelines and BEPS Action 13, straight through. UAE rules under Articles 34 and 55 of Federal Decree-Law 47 of 2022 and Ministerial Decision 97 of 2023 lean on the OECD framework for the arm's length principle, the five recognised methods (CUP, resale price, cost plus, TNMM, profit split) and the Master File / Local File structure itself. Why it matters in practice: a treaty-partner tax authority reviewing the same transaction from its own side is reading off the same rulebook you are.
Filed under: transfer pricing UAE, Master File, Local File, CbCR, OECD BEPS, Federal Decree-Law 47, Ministerial Decision 97
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