Transfer pricing documentation in the UAE — arm's-length, on file.

Transfer pricing is the set of rules requiring that transactions between related parties and connected persons be priced at arm's length — that is, on the same terms independent parties would have agreed. It comes from Federal Decree-Law No. 47 of 2022 and the supporting Ministerial Decision No. 97 of 2023, and the UAE rules follow the OECD Transfer Pricing Guidelines. The point is to stop profit being shifted artificially between group entities through non-market pricing. Velmont Crest prepares the documentation — the disclosure form, the Local File and Master File, and a written policy — so your arm's-length position is evidenced. We're an accounting practice, not a tax agent; for contentious opinions we refer you to a registered FTA tax agent.

The arm's-length principle applies to every UAE taxable person with related-party or connected-person transactions — it is not limited to large multinationals. Related parties broadly include entities under common ownership or control, and connected persons include owners, directors and their relatives who transact with the business. So even a single UAE company that pays a management fee to its shareholder, or trades with a sister company, is within the rules. The documentation intensity scales with size: the disclosure form applies where transactions cross the FTA thresholds, while the full Master File and Local File only bite at the higher revenue levels.

The Master File and Local File are required where the UAE entity's revenue is at least AED 200 million in the relevant tax period, or where it is part of a multinational group whose consolidated revenue is at least AED 3.15 billion. Below those thresholds, the two files are generally not mandatory, though the arm's-length principle and the related-party disclosure form still apply. Where the files are required, they must be maintained and submitted to the FTA within 30 days of a request — which is why we build them on an annual cycle rather than waiting for the letter.

The related-party disclosure form is a schedule filed together with the corporate tax return, setting out the taxable person's related-party and connected-person transactions where they exceed the FTA's thresholds. It captures the nature and value of each controlled transaction and the transfer pricing method applied. Because it's filed with the return, it needs to be prepared alongside the corporate tax computation, not bolted on afterwards — the values have to tie back to the accounting records. We map the transactions and prepare the disclosure so it reconciles cleanly to what you file.

The arm's-length principle is the standard that transactions between related parties should be priced as if the parties were independent and dealing at market terms. If a UAE company sells goods to its overseas parent, charges a management fee to a sister entity, or lends money within the group, the price or rate has to be one that unrelated parties would have agreed in comparable circumstances. Demonstrating arm's length is what the functional analysis, the method selection and the benchmarking study are all for — they show the FTA that the intercompany price sits within a defensible market range.

The UAE follows the five methods set out in the OECD Transfer Pricing Guidelines: the comparable uncontrolled price (CUP) method, the resale-price method, the cost-plus method, the transactional net margin method (TNMM) and the profit-split method. There's no fixed hierarchy that forces one over another — the most appropriate method is chosen on the facts of each controlled transaction, driven by the functional analysis. TNMM is the most common in practice for routine service and distribution activities, while CUP is preferred where reliable comparable prices exist. We document why the selected method fits, because that reasoning is what the file has to defend.

A benchmarking study is the analysis that establishes the arm's-length range for a controlled transaction by comparing it against data from independent companies performing similar functions. Using recognised comparables databases, the study screens for comparable companies, applies selection criteria and produces a range of arm's-length results — typically expressed as a margin or mark-up. The tested party's actual outcome is then shown to fall within that range. Without benchmarking, an arm's-length claim is just an assertion; with it, the Local File has objective support the FTA can review. We coordinate the study as part of the documentation.

Where the Master File and Local File are required, they must be produced within 30 days of an FTA request. If they don't exist, or exist only as a thin after-the-fact justification, the position is exposed: the FTA can challenge the pricing, adjust the taxable income and apply administrative penalties, and an adjustment in one entity can cascade into related filings. The related-party disclosure form carries its own compliance exposure if it's incomplete or inconsistent with the return. The practical defence is contemporaneous documentation — a file built during the year, refreshed annually, ready to upload. That readiness is what we prepare.

No. Velmont Crest is a UAE accounting practice. We prepare and coordinate transfer pricing documentation — the related-party disclosure form, the Local File and Master File, the benchmarking study and a written TP policy — and we align it with your corporate tax return and accounting records. We don't act as a registered FTA tax agent, we don't provide formal representation before the FTA, and we don't guarantee a particular FTA outcome on a contentious position. Where agent representation or a contentious tax opinion is needed, we coordinate with a registered FTA tax agent and hand over a documentation file that's ready for them to work from.

The UAE transfer pricing rules cover two overlapping groups, and both have to be priced at arm's length. Related parties are entities and individuals linked by ownership, control or kinship — companies under common ownership, an entity and its 50%-or-more owner, and relatives up to the fourth degree. Connected persons is the narrower category aimed at owner-managed businesses: it captures a company's owner, a director or officer, and their relatives, along with any entity they connect to. The practical difference is that payments to a connected person — a director's salary, a management fee to a shareholder, rent to an owner — are tested not only against arm's length but also against a commercial-benefit standard for corporate tax deductibility. We map both sets when we build the related-party landscape so neither is missed on the disclosure form.

Yes. The arm's-length principle and the transfer pricing documentation rules apply to free zone companies in the same way as to mainland companies — being in a free zone does not exempt a business from transfer pricing. In fact the rules matter more for a Qualifying Free Zone Person: keeping the 0% corporate tax rate on qualifying income depends on transactions with related parties and connected persons being at arm's length and properly documented. A free zone entity that trades with a mainland sister company, pays a management charge to its group, or lends within the group has to evidence those prices just as any taxable person does. We prepare the disclosure form and, where the thresholds are met, the Local File for free zone entities too.

Transfer pricing records fall under the general UAE corporate tax record-keeping obligation, so the disclosure form working papers, the Local File, the Master File and the benchmarking study should be retained for at least seven years from the end of the tax period they relate to. Because the FTA can request the Master File and Local File within a 30-day window and can review historical periods, the documentation needs to stay both retained and retrievable — a file that existed but can't be produced is no defence. We set the documentation up to be archived and refreshed on the same annual cycle as the year-end audit, so each year's file is retained in order rather than reconstructed years later.