Transfer Pricing Documentation in the UAE

The UAE’s move to a corporate tax regime has reshaped compliance obligations for companies operating in the region. Among the most significant changes are the new transfer pricing (TP) rules, which require businesses to document and justify the prices of transactions with related parties.

The Federal Tax Authority (FTA) expects companies to maintain two sets of documentation: a Master File, giving a high-level view of the multinational group, and a Local File, focusing on the specific activities of the UAE entity. These files prove that related-party dealings are consistent with the arm’s length principle, meaning they reflect what two independent companies would agree under comparable conditions.

While the Ministry of Finance has not yet published detailed filing templates, the system closely follows the OECD Transfer Pricing Guidelines. This allows businesses to anticipate the requirements and prepare in advance.

The Master File: A Group-Level Story

The Master File provides tax authorities with a bird’s-eye view of how a multinational group operates worldwide. Rather than detailing a single company’s performance, it explains how the group creates value across borders and where risks might lie.

Typical areas covered include:

Ownership and structure – visual charts or descriptions of how the group is organized.
Global operations – the main products and services offered, supply chains, and key markets.
Strategic changes – recent mergers, acquisitions, or restructurings that affect the group.
Intellectual property – where the group’s trademarks, patents, and technology are located and how they are managed.
Financing arrangements – how the group raises and allocates funds, including details of treasury centers.
Financial position – consolidated annual accounts and any important tax rulings.

Think of the Master File as a corporate profile for regulators—a document that explains the business model at a global level.

The Local File: A UAE-Focused Report

The Local File zooms in on the UAE entity and its dealings with group companies. This is where businesses must show, in detail, that their transactions are priced fairly and comply with local rules.

Key elements usually include:

1. Information on the UAE Entity

The company’s local structure and decision-making lines.
A description of its activities, strategy, and target markets.
Any restructurings or asset transfers that impacted operations.
The list of major competitors in the UAE market.

2. Intercompany Transactions

A breakdown of material transactions with related parties and their value.
Copies of relevant intercompany contracts.
An analysis of the functions performed, risks assumed, and assets used by both sides of the transaction.
The chosen pricing method and justification for using it.
Benchmarking studies, including how comparables were selected and adjusted.
A conclusion on whether the prices align with the arm’s length standard.

3. Financial Data

Audited accounts of the UAE entity.
Reconciliation between financial statements and TP figures.
Data tables summarizing comparables used in the benchmarking.

The Local File is essentially the evidence file that will be used first in case of an FTA review or audit.

Why Strong TP Documentation Matters

Creating thorough Master and Local Files is not just a regulatory checkbox. Well-prepared documentation helps businesses:

Avoid penalties – Incomplete or missing files can lead to fines and tax reassessments.
Defend pricing – In case of an audit, detailed analysis supports the taxpayer’s position.
Prevent double taxation – Proper documentation helps resolve disputes with foreign tax authorities.
Strengthen governance – Transparent reporting builds trust with investors and lenders.

Risk Areas for UAE Companies

Certain transaction types are more likely to attract attention from regulators. These include:

Management and advisory fees charged within a group.
Licensing of trademarks and technology between affiliates.
Intercompany financing arrangements, including loans and guarantees.
Centralized procurement or distribution centers located in the UAE.
Cost-sharing for shared services or R&D projects.

Companies involved in any of these must ensure that their TP documentation is particularly robust.

Best Practices for Compliance

To stay ahead of regulatory expectations, UAE businesses should adopt these practices:

Create a transaction inventory – Map out all related-party transactions to avoid overlooking smaller but material deals.
Invest in quality benchmarking – Use reliable external databases and keep records of methodology.
Update continuously – Treat documentation as a living process, not an annual project.
Align with Economic Substance – Ensure TP files are consistent with Economic Substance Regulation (ESR) reports.
Use technology – Digital solutions can help track intercompany transactions and prepare reports faster.

ADE Professional Solutions: Your Partner in Transfer Pricing

At ADE Professional Solutions, we provide businesses with practical support to meet transfer pricing requirements, including:

Reviews of intercompany transactions and risk exposure.
Advisory on selecting the right TP methods for different situations.
Preparation of Master and Local Files that meet both OECD and UAE standards.
Tailored consulting for high-risk or complex structures.

For more than 10 years, we have supported leading multinational clients such as Volvo, Ritter Sport, Hansgrohe, Miele, Doppelmayr, Hoya Holding, Biocodex, and many others.