Transfer pricing used to be something only large multinationals worried about. Under the UAE Corporate Tax regime, that has changed: every business with related-party transactions now has obligations – the only question is how heavy they are. This guide explains, in plain terms, who needs full transfer pricing documentation, who does not, and what you must do either way to stay safe with the Federal Tax Authority (FTA).
The one rule that applies to everyone: arm’s length
At the heart of transfer pricing is the arm’s length principle: transactions between related parties must be priced as if they were between independent parties. If you pay your own group company a management fee, lend money to a shareholder, or buy stock from a sister entity, the price must reflect what unconnected businesses would have agreed. This applies regardless of your size. You cannot shift profit to a lower-taxed entity through artificial pricing.
What every business must file
All taxable persons with related-party or connected-person transactions must complete a Transfer Pricing Disclosure Form as part of their annual Corporate Tax return. This is separate from – and far more common than – the Master File and Local File. If you transact with group companies, owners, or their relatives, assume the Disclosure Form applies to you.
Who needs a Master File and Local File?
The heavier documentation – a Master File (group-level picture) and Local File (entity-level detail with benchmarking) – is only triggered when you cross a threshold:
| You must keep a Master File & Local File if… |
|---|
| Your revenue is AED 200 million or more in the relevant tax period, OR |
| You are part of a multinational group with consolidated global revenue of AED 3.15 billion or more |
If you fall below both tests, you are not required to prepare a formal Master File or Local File. Note a useful nuance: a large UAE-only group – parent and subsidiaries all UAE-resident – has a Local File obligation but no Master File obligation, provided consolidated revenue stays under AED 3.15 billion.
Master File vs Local File – what’s the difference?
| Master File | Local File | |
|---|---|---|
| Scope | The whole group | One UAE taxable person |
| Contains | Global operations, value chain, IP & financing strategy | Functions, risks, assets, TP methods, benchmarking |
| Purpose | High-level picture for the FTA | Detailed support for each controlled transaction’s price |
“I’m a small business” – what you actually have to do
Being below the threshold does not mean transfer pricing is irrelevant. In practice, an SME with related-party dealings should:
- Identify related parties and connected persons – group companies, shareholders, directors, and their relatives.
- List your controlled transactions – management fees, loans, rent, shared services, sales of goods, royalties.
- Price them at arm’s length and keep simple evidence of how you arrived at the price.
- Complete the Disclosure Form accurately with the CT return.
- Be ready to substantiate your pricing if the FTA requests it – even without a formal Local File.
The businesses that get caught out are usually the ones that assumed “we’re too small for transfer pricing” and left related-party pricing undocumented. A light, proactive file costs far less than an FTA adjustment plus penalties.
How Harrison & Morgan helps
We make transfer pricing proportionate to your size: identifying your related parties, testing your intercompany pricing against the arm’s length standard, completing the Disclosure Form, and preparing a Master File / Local File where the threshold applies. Paired with our Corporate Tax team, we make sure your TP position and your CT return tell the same, defensible story.
Unsure whether you need a Local File? Book a free consultation and we’ll assess your position in minutes.
Frequently asked questions
Do small businesses need transfer pricing documentation in the UAE?
Every taxable person with related-party or connected-person transactions must complete a Transfer Pricing Disclosure Form with their Corporate Tax return. A full Master File and Local File are only required if you meet a threshold, but even below it you must apply the arm’s length principle and be able to justify your pricing to the FTA.
What is the threshold for a Master File and Local File in the UAE?
You must maintain a Master File and Local File if your revenue is AED 200 million or more in the tax period, or you are part of a multinational group with consolidated global revenue of AED 3.15 billion or more.
Do I need a Local File if I’m below the threshold?
No formal Local File is required below the threshold, but you must still apply arm’s length pricing to all controlled transactions and keep evidence to support it if the FTA asks.
What are related parties and connected persons?
Related parties include entities and individuals linked by ownership or control (broadly, 50% or more) and certain family relationships. Connected persons include owners, directors, officers and their related parties. Transactions with both must meet the arm’s length standard.
About the author. Prepared by the advisory team at Harrison & Morgan Business Advisory, led by CA Mohammed Rinshad P R. General information only, accurate to the best of our knowledge as of mid-2026. Transfer pricing rules are detailed and fact-specific – verify against the FTA Transfer Pricing Guide and seek advice before acting.