Why this reaches ordinary Dubai businesses
Transfer pricing has a reputation as a large-multinational discipline, and in most jurisdictions that reputation is fair. In the UAE it is misleading, because of how businesses here are structured.
Family groups commonly hold several licensed entities under one ownership: a trading company, a property-holding company, a free zone entity and a services company, with staff, premises and cash moving freely between them. Every one of those movements is a related party transaction. Owner remuneration is a connected person payment. None of it requires a foreign subsidiary to be in scope.
The result is that a great many businesses that would never describe themselves as multinational have a transfer pricing position — and most have never documented it.
Who we do this for
Any taxable person transacting with related parties or connected persons. Related parties include entities under common ownership or control and individuals related within the relevant degree of kinship. Connected persons include owners, directors and officers, and their related parties.
In practice: family groups with multiple entities, businesses paying management or licence fees to a parent, companies with intercompany loans or shared services, free zone companies transacting with mainland affiliates, and any owner-managed business paying its owner a salary. Compliance is also a condition of Qualifying Free Zone Person status, which brings free zone companies in whether or not they were thinking about it.
What we actually do
The sequence matters here, so we run it the same way each time:
- Map the related party landscape. Every entity, every ownership link, every individual who meets the connected person definition. Groups are frequently larger on paper than the owner has in mind.
- Identify the controlled transactions. Management fees, loans, guarantees, shared staff and premises, IP and brand use, sales of goods and services, and owner remuneration.
- Characterise each entity by the functions it performs, the assets it uses and the risks it bears. This determines what return each is entitled to and is the analytical core of the exercise.
- Select a method and benchmark it against comparable data, so the conclusion rests on evidence rather than assertion.
- Set the policy — the prices and terms going forward, documented so they can be applied consistently rather than reinvented each year.
- Paper the arrangements. Intercompany agreements that reflect what actually happens, which is very often the missing piece.
- Prepare the documentation required at your size: return disclosure for everyone, local file and master file above the thresholds.
Owner remuneration: the quiet adjustment
The most commonly missed transfer pricing item in owner-managed UAE businesses is not an intercompany transaction at all. It is the owner’s own salary.
A payment to an owner or connected person is deductible only to the extent it reflects the market value of the service actually provided. Where an owner draws a figure set by cash flow or convenience rather than by reference to the role, the excess is disallowed — and the adjustment is made in the computation whether or not anyone identified it as a transfer pricing question.
The fix is straightforward and is best done before the year end rather than during the return: establish what the role would command at arm’s length, document the basis, and align the payment to it. What does not work is setting the number first and looking for a justification afterwards.
Intercompany balances that were never agreements
The second recurring finding is a balance that grew rather than a transaction that was agreed. One company funds another, the balance sits on both ledgers for years, no interest is charged, no term is set and no agreement exists.
That is a related party loan whether or not anyone called it one, and the questions that follow are ordinary transfer pricing questions: what rate would an unconnected lender have charged, on what security, over what term. A nil rate can be defensible on the facts, but it has to be a conclusion rather than an oversight.
Alongside it sits the interest deduction limitation, which applies to the borrowing side and has its own rules where the lender is related. Highly geared group structures need this modelled rather than assumed.
The failures we are called in to fix
What we see most often:
- Assuming it only applies to multinationals. Domestic related party transactions are in scope, and most UAE family groups have them.
- Owner salary set by cash flow rather than by reference to the role, with the excess disallowed at computation.
- Intercompany balances with no agreement, no term and no rate, treated as bookkeeping rather than as lending.
- Management fees with no substance behind them — a charge between entities with nothing evidencing what was actually provided.
- Free zone companies ignoring it, when compliance is a condition of QFZP status.
- Documentation written after the year end to justify prices already charged, which is the weakest possible position.
When this needs to happen
Policy is best set before the period it applies to, because the prices you document are the prices you should have been charging. Documentation is prepared to support the return, so the operative deadline is your filing date — nine months after your tax period ends.
In practice the useful sequence is: policy and agreements in place at the start of the year, transactions recorded consistently through it, and documentation assembled at year end from records that already exist. The alternative — reconstructing a defensible position in month eight from a ledger that was not built for it — is where most of the cost and nearly all of the risk sits.
What you end up with
- Related party and connected person map
- Functional analysis for each entity
- Benchmarking study supporting the selected method
- A written transfer pricing policy to apply going forward
- Intercompany agreements drafted or reviewed
- Return disclosure schedule, and local file and master file where required
What to have ready
To start, we need:
- Group structure chart, showing ownership percentages
- List of all entities, including dormant and foreign ones
- Details of intercompany transactions and balances for the period
- Existing intercompany agreements, where any exist
- Owner and director remuneration details
- Financial statements for each entity in the group
- Details of any foreign group members and their activities
How this is priced
Scoped on the number of entities and the number of distinct controlled transactions rather than on group revenue, because that is what actually drives the work.
A two-entity group with a single management fee and an owner salary is a contained exercise. A group with a dozen entities, intercompany lending, shared services and a foreign parent is a substantially larger one. We scope it in writing after seeing the structure chart, and where full documentation is not yet required we say so rather than preparing it anyway.
Related
Frequently Asked Questions
Does transfer pricing apply to small UAE businesses?
Yes, where there are related party or connected person transactions — and most UAE family groups have them. Disclosure in the return is required regardless of size; local file and master file requirements start above the relevant thresholds.
Is my salary as owner a transfer pricing issue?
Yes. Owner remuneration is a connected person payment, deductible only to the extent it reflects market value for the service actually provided. The excess is disallowed in the computation.
We have an intercompany loan with no interest. Is that a problem?
It needs to be a conclusion rather than an oversight. A nil rate can be defensible on the facts, but the analysis has to exist, and the arrangement should be papered with a term and a rate. An undocumented balance that simply grew is the weakest position.
What documentation do we actually need?
Everyone discloses related party transactions in the return. A local file and master file are required above the relevant thresholds. Below them, a documented policy and proper intercompany agreements are still worth having, because they are what makes the return disclosure defensible.
Do free zone companies need transfer pricing documentation?
Compliance with transfer pricing rules is one of the conditions of Qualifying Free Zone Person status, so yes — a free zone company relying on the 0 per cent rate cannot treat this as optional.
When should we do this work?
Before the period it applies to, ideally. Documentation written after year end to justify prices already charged is the weakest form of it. Policy first, consistent recording through the year, documentation assembled from records that already exist.
What is the arm’s length principle?
That transactions between related parties should be priced as they would have been between independent parties in comparable circumstances. Everything else in transfer pricing — method selection, benchmarking, functional analysis — exists to establish what that price is.
Send us the structure and the intercompany transactions. We will tell you what documentation you actually need, and what you do not.
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Last reviewed 27 July 2026. Rates, thresholds and deadlines change — the e-invoicing provider deadline has already moved once. Confirm current requirements with the Federal Tax Authority before acting, or ask us to check your position.