Transfer pricing UAE: related parties, arm's length and documentation

Article 35 defines related parties. One example: a natural person and a company are related where the person directly or indirectly owns 50% or more of the company. Relatives, companies under common control and partners in the same partnership are also caught by the wider definition.

Connected persons are a separate group under Article 36, typically owners, directors and officers. Payments or benefits to them are deductible only to the extent they correspond with market value.

Article 34 requires transactions between related parties to meet the arm's length standard: their results should match what independent parties would agree in similar circumstances. Where they do not, the FTA can adjust taxable income. The FTA has also published a public clarification on downward adjustments made by taxpayers in the return.

Even a business that elects small business relief remains subject to the arm's length principle, although the FTA says it does not need to keep transfer pricing documentation.

Article 55 and Ministerial Decision No. 97 of 2023 set out the layers:

• A disclosure of related party and connected person transactions can be required with the tax return.
• A master file and local file are required where the business has revenue of at least AED 200 million in the period, or belongs to a multinational group with consolidated revenue of at least AED 3.15 billion.
• Those files must be produced within 30 days of an FTA request, or a later date the FTA allows.

The hardest part for a smaller group is knowing which transactions to disclose. In HelloBooks each contact can be tagged as a related party or connected person, and the AI agent carries that tag onto every bill, invoice and payment it records. Ask "list all related party transactions over AED 50,000 this year" and you get a schedule your tax agent can test for pricing. The agent does not decide what arm's length means; your adviser does. Firms that want a custom disclosure layout can request it at /book-a-demo.