Transfer Pricing & Benchmarking
Transfer pricing governs how transactions between related parties are priced. UAE Corporate Tax requires those dealings to be on terms independent parties would have agreed, and — above certain thresholds — to be formally documented.
Transfer pricing catches businesses that do not think of themselves as groups. A management fee charged by a parent, a loan between sister companies, a director drawing a salary from one entity while working across several — all are related-party dealings, and all need to stand up as arm's length. Businesses often discover this at filing, when the disclosure form asks for figures nobody has prepared.
Benchmarking is what turns an assertion into a position. A study identifies comparable independent transactions and shows where a related-party price sits against them, which is the evidence an authority asks for. Doing it before a price is set is straightforward; doing it afterwards, to defend a price already charged, is considerably harder.
Arm's length is a comparison, not a formula. Establishing it means selecting a method appropriate to the transaction — comparing the price charged to independent parties for the same thing, or building up from cost with an appropriate margin, or testing the net profitability of the party performing the function. Which method fits depends on what is actually being transacted and on what comparable data exists, and the choice itself has to be explained.
A related party and a connected person are not the same thing, and businesses often address one while missing the other. Related parties are broadly other entities and individuals linked by ownership or control. Connected persons reach the owners, directors and their relatives, and the payments made to them — remuneration, benefits, rent on premises they own — which are tested against what an unrelated party would have received for the same contribution.
Documentation obligations are tiered rather than universal. The disclosure that accompanies a return is one thing; maintaining a master file and local file is a further requirement that attaches above certain thresholds. Establishing which tier applies to you is the first question in any engagement, because it determines whether the work is a disclosure exercise or a full documentation project.
We prepare master and local file documentation, benchmarking studies, and the related-party and connected-person disclosures that accompany a Corporate Tax return.
What this covers
Transfer Pricing & Benchmarking
TP documentation, related-party disclosures and benchmarking studies aligned with UAE corporate tax law and OECD guidance.
Work it out yourself, free
1 of our free calculators apply directly to this area — no sign-up, no account.
Common questions
We are a small group with only intercompany loans. Does transfer pricing apply?
Potentially yes. The rules turn on whether the parties are related and whether the dealings are on arm's length terms, not on the size of the group or the type of transaction. Intercompany financing is one of the most commonly reviewed areas.
What is a benchmarking study?
An analysis identifying comparable transactions between independent parties, used to show that a related-party price falls within an acceptable range. It is the supporting evidence behind a transfer pricing position.
Do payments to owners and directors count as related-party transactions?
They can. Connected-person dealings — including remuneration and benefits paid to owners, directors and their relatives — are within scope and are tested for whether they reflect market terms.
Do we have to maintain a master file and local file?
Not every business does. The disclosure accompanying a Corporate Tax return is separate from the master and local file requirement, which attaches above certain thresholds. Establishing which applies to you is the first step, because it decides the scale of the work.
Which transfer pricing method should we use?
It depends on the transaction and on what comparable data exists — comparing prices charged to independent parties, building up from cost with a margin, or testing the net profitability of the party performing the function. The choice of method has to be justified, not just applied.
Talk to PrimeLedger
Tell us where your business stands and we will set out what applies to you, what has to be filed, and by when.
This page is general information about how the rules work, not advice specific to your business, and it does not state rates, thresholds or deadlines — those change, and your position depends on facts we would need to review. Contact PrimeLedger before acting on anything here.