Transfer Pricing

Applicability of Transfer Pricing in the UAE

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Chapter 4

Applicability of Transfer Pricing in the UAE


The proposed Corporate Tax Regime in the UAE vide release of Public Consultation Document inter-alia introduces TP rules to ensure that the price of a transaction is not influenced by the relationship between the parties involved.
The Proposed CT regime requires the ‘Arm’s Length’ principle to be followed while undertaking transactions between “Related Parties” and “Connected Persons”.

Related Parties

As per Public Consultation Document, a related party is an individual or entity that has a pre-existing relationship with a business that is within the scope of the UAE Corporate Tax regime through ownership, control, or kinship (in the case of natural persons).

The following rules are prescribed to determine whether parties involved in the transaction would be considered “Related Parties” for the purpose of UAE Corporate Tax:

1.     Two or more individuals

Related to the fourth degree of kinship or affiliation, including by birth, marriage, adoption, or guardianship

2.     An individual and a legal entity

Individuals alone or together with a related

party directly or indirectly owns a 50% or greater share in, or controls the legal entity

3.     Two or more legal entities

•      Legal entity alone, or together with a Related Party, directly or indirectly owns a 50% or greater share in or controls the other legal entity.

•      Taxpayer alone, or with a related party, directly or indirectly owns a 50% share of each or controls them

4.     Taxpayer

Its branch or permanent establishment

5.     Unincorporated partnership

All partners

6.     Exempt and non-exempt business

Activities of the same person

Connected Persons


Payments or benefits provided by a business to its “Connected Persons” will be deductible only if the business can demonstrate that the payment or benefit:

  • corresponds with the market value of the service provided; and
  • is incurred wholly and exclusively for the purposes of the taxpayer’s business.
A person will be considered as ‘connected’ to a business that is within the scope of the UAE Corporate Tax regime under the following circumstances:
  • Individual, who has direct or indirect ownership/control in the taxable person
  • Director / Officer of the taxable person
  • An individual related to the owner, director, or officer
  • Any other partner of the unincorporated partnership
  • A related party of any of the above

Covered Transactions


On the basis of a plain reading of the proposed Corporate Tax Regulations and as also generally understood, all kinds of transactions (whether oral or written, enforceable or unenforceable), domestic and international, between related parties would be the subject matter of TP Regulations.

However, it is indicated that a certain threshold limit would be set for the maintenance of documentation to facilitate ease of doing business.

Simply put, the purchase and sale of tangible and intangible assets, goods, provision, and availing of services, cost-sharing arrangements, reimbursements, support services, management charges, and financial transactions (loans, guarantees, etc.) would get covered.

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