Adapted and expanded from Dr. Ahmad Helwani’s original LinkedIn publication. This website edition includes current technical updates and practical examples.

Start with the transaction, then choose the method

Transfer pricing is the process of assessing whether transactions between related parties reflect terms that independent businesses would agree in comparable circumstances. For a UAE business, the practical starting point is a clear account of what was supplied, who performed the work and how the price was established. A signed agreement helps, but it should also match the commercial arrangement and the accounting records.

The UAE rules cover domestic as well as cross-border transactions. An arrangement between a mainland company and a related free-zone company therefore deserves attention even when no payment leaves the country.

Build a complete transaction inventory

Prepare a related-party register and reconcile it to the general ledger. Look beyond sales invoices: funding, guarantees, management support, property use and balances left outstanding can also require review. Record the transaction value, counterparties, contractual terms, tax period and supporting documents.

This exercise often reveals the real preparation gap. For example, a service charge may have been posted under general expenses while the underlying calculation is held only in an email. Bringing that calculation into the year-end file makes the position easier to explain and review.

Understand functions, assets and risks

Before selecting a margin or interest rate, identify the economic contribution of each party. Who makes decisions? Who employs the people doing the work? Who owns or uses important assets? Who controls and can financially bear the relevant risks? The answers should reflect actual conduct, rather than labels such as consultant or distributor alone.

For an internal service arrangement, a useful working paper identifies the services, the recipients and the evidence of delivery. Timesheets, deliverables and an explanation of the allocation basis can make the commercial narrative much clearer than a single annual invoice.

Select an appropriate pricing method

Recognised methods include comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split. The appropriate choice depends on the transaction, the functional analysis and the availability of reliable comparable information. A convenient percentage is not, by itself, a pricing method.

Internal transactions with independent customers or suppliers can provide a useful starting point, but differences in volume, credit terms, market, responsibilities or risk must be considered. Where external benchmarking is needed, record the search criteria, the selected comparables and the reasons for any adjustments.

Separate pricing compliance from filing thresholds

A business should not treat the master-file and local-file thresholds as a general exemption from arm’s-length pricing. Under Ministerial Decision No. 97 of 2023, those files are required where the relevant taxable person meets either the AED 200 million revenue condition or the specified multinational-group condition involving consolidated revenue of at least AED 3.15 billion. The decision also defines the transactions to include in the local file.

The Corporate Tax return has separate disclosure requirements. The FTA return guide describes an aggregate related-party transaction threshold exceeding AED 40 million, followed by category-level disclosure above AED 4 million, subject to its detailed instructions. Connected-person reporting is assessed separately. Check the applicable return guidance rather than applying one threshold to every obligation.

Keep the policy connected to the books

Consider a group company that pays shared software and finance-team costs. A practical review would identify the cost pool, remove items unrelated to the recipients, document an appropriate allocation key and assess whether any mark-up is justified. It would then reconcile the resulting charges to invoices and ledger balances. This is a workflow illustration, not a prescribed allocation formula.

Review the arrangement when functions, financing or commercial terms change. A coherent file connects the agreement, evidence of performance, pricing analysis, accounting entries and return disclosures. That connection makes transfer pricing a repeatable finance process rather than a document assembled only when questions arise.

Sources and further reading

Reviewed and expanded on 2 November 2026. Examples are illustrative. The treatment of a particular business depends on its facts and the rules applicable to the relevant period.