Table of Contents
- What UAE Transfer Pricing Means for a Founder
- Who Counts as a Related Party Under UAE Transfer Pricing
- Two Tests Inside UAE Transfer Pricing: Related Parties and Connected Persons
- Does UAE Transfer Pricing Reach a Small Company?
- Three Layers of UAE Transfer Pricing Paperwork
- Where UAE Transfer Pricing Catches Founders
- A Four-Step UAE Transfer Pricing Check: Map, Classify, Price, Paper
- My View: Treat UAE Transfer Pricing as a Habit
- Limits of This Article
- FAQ
- Your Next Step
What UAE Transfer Pricing Means for a Founder
UAE transfer pricing is the rule that business between connected parties must be priced as if the parties were strangers. The UAE did not need it while there was no federal corporate tax. Since Corporate Tax arrived, UAE transfer pricing applies to every taxable company that deals with a related party or a connected person, and founders often fall into that group without noticing.
A founder usually runs more than one thing. There is a mainland company, perhaps a free zone company, a holding structure, a home-country entity, and the founder as a shareholder, director and lender. Each payment between those pieces is a transaction the FTA can test. The FTA Transfer Pricing Guide (CTGTP1) puts it plainly: the absence of a formal agreement does not mean there is no arrangement, and a service provided free or below market value is still tested against the arm’s length principle.
This article explains how UAE transfer pricing defines the people it covers, which tests apply, what has to be filed, and where a founder-led group is most exposed. Figures and thresholds are as of 20 October 2026 and come from the sources linked in each section.
Who Counts as a Related Party Under UAE Transfer Pricing
The UAE transfer pricing rules apply to two overlapping groups. The FTA guide sets out the definitions that come from Articles 35 and 36 of the Corporate Tax Law.
| Test | When two persons are related |
|---|---|
| Ownership | A person, alone or with their related parties, directly or indirectly owns 50% or more of a company. Indirect holdings multiply: 100% x 90% x 80% is 72%, so the bottom company is related to the top owner. |
| Control | 50% or more of the votes, 50% or more of the board appointments, 50% or more of the profits, or significant influence over the conduct of the business. |
| Kinship | Individuals related up to the fourth degree, including by marriage and adoption. The fourth degree reaches first cousins and the spouse’s equivalent relatives. |
| Trusts and foundations | A founder, settlor, trustee or beneficiary of a trust or foundation is related to it and to its related parties. |
| Other ties | A company and its permanent establishment, and partners in the same unincorporated partnership. |
The control test in UAE transfer pricing is wider than most founders expect. The guide gives an example of a UAE company that is 51% owned by one company, but whose strategy and key market decisions are made by the 49% foreign shareholder. Both are related parties of the company, one through ownership and one through control.
Connected persons are a narrower, owner-focused list: an individual who owns or controls the taxable person, a director or officer, and a partner in an unincorporated partnership, together with the related parties of each. If you own the company and sit on its board, you are on this list twice.
Two Tests Inside UAE Transfer Pricing: Related Parties and Connected Persons
The two groups are treated differently, and this is the part that most summaries blur. UAE transfer pricing applies one logic to related parties and a stricter deduction rule to connected persons.
Related parties. Article 34 requires transactions with related parties to meet the arm’s length principle. If the result falls outside the arm’s length range, the FTA can adjust the taxable income in the return. The guide describes the disclosure form as a self-assessment: the burden is on the taxpayer to make sure the year’s transactions line up with the principle.
Connected persons. Under Article 36, payments or benefits that a taxable person gives to a connected person are deductible only to the extent that they correspond to the arm’s length price of the service or benefit, and are incurred wholly and exclusively for the business. A salary, a director fee, rent paid to the owner or a “consulting” invoice from the owner’s personal company all sit here. Listed companies and companies under the oversight of a UAE regulator are outside this limit, as the guide notes.
The practical point: the connected-person rule can reduce your deduction even if no tax is avoided on the other side. A founder who treats a payment to themselves as a free decision may find the deduction capped at what an outsider would have been paid for the same work.
Does UAE Transfer Pricing Reach a Small Company?
Yes for the principle, no for the paperwork, at least by default: UAE transfer pricing covers small companies, but documentation duties do not. The guide states that exempt entities, entities that elected Small Business Relief and standalone entities with no related-party transactions must still meet the arm’s length principle for controlled transactions but do not have to prepare transfer pricing documentation.
That distinction matters for founders who elected relief to keep compliance light. Election removes a documentation burden, not the duty to price correctly. It also does not protect the other party. A taxable person that deals with a resident small-business-relief elector, or with a Qualifying Free Zone Person taxed at a different rate, has to cover those transactions in its Local File if it is required to keep one.
Three Layers of UAE Transfer Pricing Paperwork
Compliance comes in layers. Which layer you reach depends on size, not on whether you did anything wrong.
| Layer | Who it applies to | What and when |
|---|---|---|
| Disclosure form (Related Party and Connected Person schedules) | Taxable persons above a materiality threshold | Filed with the Corporate Tax return within nine months of the end of the tax period. The thresholds below come from adviser summaries, not from a page I opened at the FTA. |
| Master File and Local File | Revenue of AED 200 million or more, or a multinational group with consolidated revenue of AED 3.15 billion or more | Prepared contemporaneously. The FTA can ask for them and gives 30 days, or longer if agreed. |
| Request-based information | Taxable persons not required to keep the files | Under Article 55(4) the FTA may request information on related-party transactions and on why the price is arm’s length. |
On the disclosure thresholds, the Andersen note summarising the FTA’s Corporate Tax Guide on Tax Returns reports these figures. The related party schedule applies when all related-party transactions exceed AED 40 million, and then only for a transaction category (goods, services, intellectual property, interest and so on) that exceeds AED 4 million. For connected persons, the schedule applies when the aggregate value exceeds AED 0.5 million, and then only for individual payments or benefits above AED 0.5 million per connected person.
The KPMG summary confirms the AED 40 million and AED 4 million figures. Dividends are not reported in the related party schedule.
A founder who pays themselves and related entities more than AED 500,000 in a year therefore reaches the connected-person schedule of UAE transfer pricing long before they approach the Master File and Local File limits. This is why I think the connected-person rule is the one that catches owner-managed groups.
Where UAE Transfer Pricing Catches Founders
These are five patterns that follow directly from the definitions above. They are illustrations of how the rules read, not client stories or tax advice.
| Pattern | Why the rules look at it | What to have on file |
|---|---|---|
| Management or consulting fee from the UAE company to the owner’s overseas company | Owner and their related parties are connected persons; the deduction is limited to the arm’s length price and to wholly and exclusively business use | Written agreement, description of the work, why that amount |
| Owner salary or director fee | Director, officer and owner are connected persons | Role description and a view of what an outsider would be paid |
| Shareholder loan, interest-free or at a round number | The guide treats shareholder loans as controlled transactions that can be priced against third-party loans | Loan agreement and a reason for the rate |
| Services shared between a mainland and a free zone company of the same owner | Common ownership makes them related; different tax rates raise the stakes and put the transaction in scope of a Local File | Cost-sharing or service agreement and a charging basis |
| Parent charging its subsidiary for owner-level costs | The guide says shareholder activities, such as costs of the parent’s own structure and reporting, should not be charged to group members | A list of what is a service and what is shareholder cost |
The fourth row is where I would look first in a group with both a mainland and a free zone company. A Qualifying Free Zone Person is taxed differently on qualifying income, so a price set between the two companies decides where profit lands. That is exactly the situation the arm’s length principle exists for.
If your structure includes a holding company, read the guide’s logic alongside our article on the UAE holding company. And if the owner is not in the country, the connected-person payments and the place of management belong in the same conversation as running a UAE company from abroad.
A Four-Step UAE Transfer Pricing Check: Map, Classify, Price, Paper
I like to approach structures the way an engineer approaches a system: draw it, label the interfaces, then test each one. For UAE transfer pricing that becomes four steps, and the same four steps work for a two-company group or a ten-company one.
| Step | Question | Output |
|---|---|---|
| 1. Map | Who owns, controls, directs or is related to each entity, including family and any trust or foundation? | One-page chart of entities and individuals |
| 2. Classify | For every flow of money or service between them: related party, connected person, or both? | List of controlled transactions with annual values |
| 3. Price | What would an independent party charge or pay for the same thing? Is there comparable third-party evidence? | A price, the method behind it and the evidence |
| 4. Paper | Is there an agreement, an invoice and a short note that explains the price? Do the totals cross the disclosure thresholds? | Agreement, file note, and a disclosure decision before filing |
Step 3 is where most groups stall, because comparables take effort. The guide treats a comparability analysis as the heart of the principle. For a small group, a reasonable approach is to start with what the same service costs from an unrelated provider and keep that quote on file.
My View: Treat UAE Transfer Pricing as a Habit
Most founder-run groups are nowhere near the Master File limit, and I would not pay for a full report they do not need. But I think it is a mistake to conclude that UAE transfer pricing does not concern them, because it follows the relationship, not the size. The principle applies at any size, the connected-person deduction rule reaches owner payments, and the FTA can request support under Article 55(4). A one-page agreement and a file note cost very little next to a disallowed deduction.
My recommendation is to decide the prices on purpose, once a year, before the year-end accounts are drawn up. Do not let intercompany balances build up unpriced for three years and then try to explain them. And be careful about the idea that moving profit between a mainland and a free zone company is a free choice. It is a priced transaction, and the other company’s tax position is part of the answer.
Limits of This Article
I opened and read the FTA Transfer Pricing Guide (CTGTP1) dated October 2023, and used it for the definitions, the scope rules, the documentation layers and the examples. I could not open the text of Federal Decree-Law 47 of 2022 or of Ministerial Decision 97 of 2023 itself: the guide cites both and I rely on its description.
I also did not open the FTA’s Corporate Tax Guide on Tax Returns. The AED 40 million, AED 4 million and AED 0.5 million thresholds come from the Andersen and KPMG summaries of it, so confirm them against the FTA return form before you file.
I did not cover penalties for missing or incorrect disclosure, double tax treaties, or the procedure for downward adjustments, which the Andersen note says needs FTA approval. Rules change, so verify before acting. This is general information, not legal or tax advice.
FAQ
Does UAE transfer pricing apply to a small company?
Yes, in principle. The FTA guide says exempt entities, Small Business Relief electors and standalone entities with no related-party transactions must still meet the arm’s length principle for controlled transactions. What they are not required to do is prepare transfer pricing documentation. The practical question for a small company is therefore not whether the principle applies, but whether you can explain a price if the FTA asks.
Is my salary or director fee a transfer pricing issue?
It can be. A person who owns or controls a taxable company, or who is its director or officer, is a connected person under the guide. Payments or benefits to a connected person are deductible only to the extent that they match the arm’s length price and are incurred wholly and exclusively for the business. Listed companies and regulated entities are carved out of this limit. For a private founder-led company, document what the role is worth.
Do I need a transfer pricing report?
Not by default. A Master File and Local File are required only where the taxable person’s revenue is AED 200 million or more, or it belongs to a multinational group with consolidated revenue of AED 3.15 billion or more. Below that, the FTA can still ask for information on related-party transactions under Article 55(4), so keep a short file that supports your prices.
What is the transfer pricing disclosure form?
It is the related party and connected person schedule that accompanies the Corporate Tax return. The FTA guide says it is filed with the return within nine months of the end of the tax period. It describes the nature and value of controlled transactions, the related parties and the pricing method. Adviser summaries of the FTA returns guide put the triggers at AED 40 million for related-party transactions and AED 0.5 million for connected persons.
Can I lend money to my company without charging interest?
I cannot give you a yes or no, and no one should without the facts. The guide says a transfer without remuneration, or below market value, must still be tested against the arm’s length principle, and it treats shareholder loans as transactions that can be priced by reference to comparable third-party loans. Put the loan in writing, decide the rate on purpose, and ask a tax adviser to confirm the position.
Your Next Step
If your group has more than one entity and the owner is paid or lends through them, draw the map from step one this month. If you would like a second view on how your structure reads under UAE transfer pricing before the next return, use our contact page to start the conversation.
