United Arab Emirates: local rules

The UAE Corporate Tax Law (Federal Decree-Law 47 of 2022) sets the transfer pricing rules. Article 34 says deals between Related Parties must be at arm's length, which means the result matches what independent parties would have agreed. Article 35 defines Related Parties (50% ownership or control, close family, a person and its permanent establishment, and partners in the same unincorporated association). Article 36 says a payment to a Connected Person (an owner, a director or officer, or their Related Parties) is deductible only up to its Market Value. The FTA Transfer Pricing Guide (CTGTP1, October 2023) follows the OECD Guidelines and is guidance, not law. The rules also apply to exempt persons and small business relief elections, which only skip the full documentation.

The FTA's transfer pricing disclosure is part of the corporate tax return and is due with it. The related party schedule is needed if all related party transactions together exceed AED 40m (then each category above AED 4m is listed), and the connected person schedule for each connected person above AED 500,000. A downward transfer pricing adjustment must always be disclosed (FTA clarification CTP011). A master file and local file are needed if the entity's revenue is AED 200m or more, or if it is in a group with consolidated revenue of AED 3.15bn or more (Ministerial Decision 97 of 2023). They must be handed over within 30 days of an FTA request, or a later date the FTA sets (Article 55(3)). The FTA expects the documentation to exist when the return is filed, and records are kept for seven years (Article 56).

Article 34(3) lists the five OECD methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split. Another method is allowed only if none of those can reasonably be applied. The most reliable method is chosen using the contract terms, the nature of the deal, the economic setting, the functions, assets and risks, and the business strategies (Article 34(5)). The FTA guide has no strict ranking, but prefers CUP when it is as reliable as another method. The interquartile range is the accepted way to narrow comparables, and any point in the range is acceptable (Article 34(7)). If a result is outside the range, the FTA adjusts it to the result that best fits the facts (Article 34(8)). Comparable searches should be fully updated every three years, with a yearly financial update in between.

No special penalty for a missing master file, local file or disclosure was found in Cabinet Decision 75 of 2023. The general penalties are AED 10,000 for failing to keep required records (AED 20,000 if repeated within 24 months), AED 5,000 for not giving documents in Arabic when asked, and AED 500 a month for a late return (AED 1,000 a month after 12 months). An incorrect return costs AED 500 unless it is corrected before the deadline, and late registration costs AED 10,000. A late CbC report or notification costs AED 1m plus AED 10,000 a day, with the daily part capped at AED 250,000. Not keeping CbC records for 5 years or not giving information costs AED 100,000, and an incomplete or wrong report costs AED 50,000 to AED 500,000 (Cabinet Resolution 44 of 2020, art. 8). Cabinet Decision 129 of 2025 (from 14 April 2026) revised VAT and excise penalties, and advisers read it as leaving the corporate tax table in Cabinet Decision 75 of 2023 in place.

The UAE has a Domestic Minimum Top-up Tax (DMTT, also called QDMTT) under Cabinet Decision 142 of 2024. It applies to fiscal years beginning on or after 1 January 2025 for groups with at least EUR 750m of revenue in two of the four preceding years, and there is no UAE IIR or UTPR. Each UAE entity registers with the FTA within 7 months of the end of its first in-scope year, but by 30 November 2026 for years ending before 30 April 2026 (FTA Decision 12 of 2026). The Top-up Tax Return and payment are due 15 months after year end. The first Transition Year gets 18 months, but that is the first year the group was in scope of any qualified IIR or UTPR for its UAE entities or of the UAE tax, so a group already under a parent IIR in 2024 gets only 15 months for 2025. The Pillar Two Information Return (GIR) is due 15 months after year end. For years beginning on or before 31 December 2026 (but not years ending after 30 June 2028), no penalties apply to the returns if the FTA agrees the group took reasonable measures, but the AED 10,000 failure to register penalty still applies.

Country-by-country reporting applies to UAE-resident ultimate parents of groups with consolidated revenue of AED 3.15bn or more (Cabinet Resolution 44 of 2020). Only the ultimate parent notifies the Ministry of Finance, by the last day of the reporting year, and the report is due 12 months after year end. The CT return and the tax are due 9 months after the end of the tax period (Article 53(1)). Corporate tax registration is event based: within 3 months of incorporation for a UAE company, and within 3 months of year end for a foreign company managed in the UAE (FTA Decision 3 of 2024). A time limit that ends on a day that is not a Business Day moves to the next Business Day (Tax Procedures Law art. 49(2)), and the UAE weekend is Saturday and Sunday. Advance pricing agreements and clarifications are available on application (CT Law art. 59).