Transfer Pricing Trends in the UAE: Key Insights for 2025 and Beyond

For many years, the United Arab Emirates was seen as a business hub with minimal taxation and light regulatory oversight. That perception changed significantly with the introduction of Federal Decree-Law No. 47 of 2022 on Corporate Tax, effective 1 June 2023. Alongside corporate tax came the formal adoption of Transfer Pricing (TP) rules that are directly aligned with the OECD’s global standards.

This change reshapes how both multinational enterprises (MNEs) and local companies manage related-party transactions, especially cross-border dealings. Understanding Transfer Pricing requirements in the UAE is now a necessity—not only for compliance but also for operational efficiency and risk control.

The New Transfer Pricing Framework

At the heart of the UAE’s TP regime is the Arm’s Length Principle (ALP). This principle requires companies to ensure that related-party transactions are priced as though they occurred between independent, unrelated businesses under comparable conditions. The Ministry of Finance has emphasized that adherence is mandatory.

Depending on size and revenue, companies must now prepare a range of supporting documentation, including:

Master File – outlining global operations, structures, and TP policies of the group.
Local File – covering UAE-specific activities, intercompany dealings, and financial outcomes.
Country-by-Country Report (CbCR) – required for large multinational groups exceeding the global revenue threshold.

This documentation framework mirrors the OECD’s BEPS Action 13 standards, aligning the UAE with leading jurisdictions and enhancing investor confidence in its tax system.

Trend 1: Closer Scrutiny by Tax Authorities

Since the introduction of corporate tax, the Federal Tax Authority (FTA) has expanded its capacity to monitor compliance. Companies can no longer assume that simply having a Master File and Local File is sufficient. Auditors are now requesting:

Detailed benchmarking studies.
Explanations for intercompany service charges.
Proof that transactions deliver real economic benefits.

High-value transactions such as licensing of intellectual property, management fees, and intercompany loans are receiving particular attention. Businesses should expect audits to move beyond formality and into substance testing.

Trend 2: Focus on Economic Substance

The UAE has enforced Economic Substance Regulations (ESR) since 2019, and these now directly interact with TP reviews. Authorities want to see evidence of value creation, not just contracts.

For example:

Service fees must be backed by tangible deliverables.
Companies claiming UAE-based management must prove that decisions are genuinely made in the Emirates.
Payments for intellectual property must reflect actual DEMPE functions—development, enhancement, maintenance, protection, and exploitation.

In short, “paper-only” structures will no longer withstand examination.

Trend 3: Alignment with OECD Standards

The UAE’s TP system is designed in harmony with OECD Transfer Pricing Guidelines. For multinational businesses, this brings both challenges and opportunities.

Challenge: Profit-shifting strategies exploiting mismatches between jurisdictions are less effective.
Opportunity: A consistent framework across jurisdictions can simplify compliance and strengthen global TP policies.

Authorities in the UAE now expect higher-quality benchmarking, carefully chosen comparables, transparent methodologies, and robust functional analyses. Generic justifications are not acceptable.

Trend 4: Technology in Compliance

As compliance requirements become more data-heavy, many companies are moving toward digital solutions. CFOs and tax teams are investing in:

Automated transaction mapping for related-party dealings.
Real-time benchmarking databases.
ERP integrations that capture TP data seamlessly for audit readiness.

Though adoption is still at an early stage, digital transformation is becoming a critical enabler for cost-effective and error-free compliance.

High-Risk Transaction Categories

The FTA and other global regulators are paying particular attention to certain intercompany transactions, including:

Management services where value is hard to measure.
Royalty payments and IP licensing, especially around trademarks and software.
Intercompany loans and financing that must reflect market-based interest rates and terms.
Procurement hubs and distribution centers located in the UAE, which may be treated as profit generators.
Cost-sharing agreements for shared functions or R&D projects.

Failure to properly document and justify these arrangements can lead to reassessments, penalties, and in some cases, double taxation.

Best Practices for Businesses

To stay ahead of regulatory developments, companies in the UAE should take a proactive stance. The following measures are considered best practice:

Map All Related-Party Transactions
Build a clear transaction matrix that captures both domestic and cross-border dealings. This reduces the risk of oversight and helps identify exposure early.
Strengthen Benchmarking Processes
Use reliable external databases and explain your methodology in detail. Refresh studies annually to reflect changing market conditions.
Maintain Living Documentation
Treat Master and Local Files as ongoing records, not once-a-year exercises. This enables faster responses to FTA requests.
Align TP and ESR Filings
Ensure consistency between Transfer Pricing documentation and Economic Substance reports. Conflicts between the two will draw scrutiny.
Leverage Technology
Invest in compliance software to streamline processes, enhance accuracy, and reduce manual workload.

Consequences of Non-Compliance

Failing to comply with TP rules in the UAE can result in:

Administrative penalties for late or inaccurate filings.
Tax reassessments that increase liabilities.
Double taxation if other jurisdictions challenge profit allocations.
Reputation risks with lenders, investors, and business partners.

In a market where the UAE seeks to build credibility as a transparent business hub, the reputational cost can be as damaging as financial penalties.

What Lies Ahead

The UAE’s Transfer Pricing regime will continue to evolve. Key developments to watch include:

Targeted audits in industries with high cross-border flows, such as energy, logistics, and technology.
New guidance on digital transactions and emerging business models.
Regional harmonization with GCC states, some of which already operate established TP frameworks.

Companies that prepare early will not only meet compliance requirements but also position themselves as trusted, transparent market participants.

Final Thoughts

Transfer Pricing in the UAE has shifted from a niche technical concern to a core part of corporate tax compliance. With stricter audits, global alignment, and a focus on economic substance, businesses can no longer afford to delay preparation.

The winners will be those who:

Approach TP strategically, linking it to broader tax and business planning.
Invest in skilled professionals, robust processes, and supporting technology.
Treat compliance as a competitive advantage in today’s transparent global economy.

Bottom line: The UAE’s TP rules are permanent, and they are evolving quickly. Early movers who embrace transparency and maintain strong documentation will be positioned to succeed with confidence in this new regulatory era.