UAE Transfer Pricing 2025: APA, Documentation & Compliance Guide - Blog - Strategic Bureaux | Premium Corporate Services UAE & India | Business Advisory & Compliance 2025

The landscape of UAE transfer pricing continues to evolve rapidly as we progress through 2025. With the UAE Corporate Tax regime now in full swing and the Federal Tax Authority (FTA) enhancing its enforcement capabilities, businesses across the Emirates face unprecedented compliance challenges that demand immediate attention.

📞 Contact us today for a comprehensive transfer pricing health check and discover how we can protect your business from compliance risks while optimizing your tax position.

What is transfer pricing

Transfer pricing is the price used for goods, services, intellectual property, or financing between related entities in the same multinational group. Tax authorities expect these prices to follow the arm’s length principle, meaning they should mirror what independent parties would agree under similar facts and market conditions.

Why transfer pricing matters

Getting transfer pricing right determines how much profit each country can tax, which directly affects cash taxes, audits, and potential penalties. With global rules tightening and 15% minimum tax frameworks applying to large groups, accurate pricing and documentation reduce double taxation risk and help preserve incentives and free‑zone benefits where applicable.

Arm’s length principle in practice

Arm’s length outcomes rely on comparability: align functions performed, assets used, and risks assumed (a functional analysis) and match to comparable independent transactions or companies. Substance over form is critical—profits should sit where people and decisions sit, especially for intangibles (DEMPE: develop, enhance, maintain, protect, exploit).

Accepted pricing methods

Choose the method that best fits your facts and evidence. Comparable Uncontrolled Price (CUP) is strongest when clean market prices exist. Resale Price suits distributors by testing gross margins. Cost‑Plus works for routine manufacturers or service centers with markups. TNMM tests net margins against comparable companies and is most commonly used. Profit Split fits highly integrated, IP‑heavy models where both sides create unique value.

Documentation you need

Maintain a master file (group overview, value chain, intangibles, financing) and a local file (entity transactions, functional analysis, method selection, benchmarking, and intercompany agreements). Prepare annual disclosures of related‑party transactions and, if in scope, country‑by‑country reporting. Keep contemporaneous evidence—don’t wait for an audit to compile it.

Policies, agreements, and ERP alignment

Write intercompany agreements that reflect what actually happens operationally, not just what’s on paper. Map related‑party customers and suppliers in your ERP, tag transactions, and automate reports for gross and net margins by legal entity, product, and customer. Build year‑end “true‑up” workflows so both sides record adjustments consistently to avoid double tax.

Annual cycle and true‑ups

Refresh benchmarks periodically, especially when markets shift. Monitor margins during the year, not after, and post arm’s length true‑ups before audit sign‑off. Align tax returns, statutory accounts, and transfer pricing documentation so numbers reconcile cleanly across jurisdictions.

Red flags that trigger scrutiny

Expect attention if routine entities show persistent losses while the group is profitable, margins swing without commercial reasons, HQ service charges lack benefit evidence, valuable IP sits in low‑substance entities, or one‑sided year‑end adjustments aren’t mirrored by the counterparty.

Interactions with incentives and minimum tax

For regimes with preferential rates, separate qualifying vs non‑qualifying income and ensure transfer pricing supports substance tests and thresholds. For large groups under minimum tax rules, arm’s length profitability in the accounts influences effective tax rate models—late or unilateral adjustments can create top‑up exposure and mismatches.

60‑day implementation plan

Weeks 1–2: Inventory all intercompany transactions, collect agreements, and prior studies.
Weeks 3–4: Complete functional analyses and select methods; kick off fresh benchmarking.
Weeks 5–6: Embed policies in ERP, set monitoring dashboards, post initial adjustments, finalize master/local files, and prepare disclosures.

Common mistakes to avoid

Don’t copy benchmarks from other markets without adjustments, set prices to hit internal budgets instead of external comparables, under‑document management services or royalty benefits, or ignore customs valuation effects for goods. Small gaps here often become big audit issues later.

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Ready to ensure your transfer pricing compliance is bulletproof for 2025?

Our experienced team of transfer pricing specialists helps UAE businesses navigate the complex regulatory landscape with confidence. From documentation preparation to strategic planning, we provide end-to-end solutions tailored to your specific industry and operational requirements.