Transfer Pricing Documentation in the UAE: Master File, Local File and the Disclosure Form

Transfer pricing documentation in the UAE has three layers, and most groups get caught on the one they think does not apply to them. Large businesses must keep a master file and local file. Almost every business with related parties must complete the transfer pricing disclosure form in its corporate tax return. And everyone must price related-party and connected-person dealings at arm's length, whether or not a threshold is crossed. This guide sets out who needs what, and how to prepare before your next return.

The arm's length rule applies to everyone

Under Article 34 of the Corporate Tax Law, transactions between related parties must be priced as if the parties were independent. Article 36 adds a separate test for payments and benefits to connected persons, such as owners, directors and their related parties: they are deductible only to the extent they reflect market value for the service or benefit received.

Thresholds decide what you must document and disclose. They do not switch off the arm's length rule. A small company paying its owner-director a management fee still has to support that fee.

Who must keep a master file and local file?

Ministerial Decision No. 97 of 2023 requires a master file and a local file where, in the tax period:

• the taxable person's revenue is AED 200 million or more, or
• the taxable person is part of a multinational group with total consolidated group revenue of AED 3.15 billion or more.

What goes in the master file

The master file describes the group as a whole: its structure, business lines, value drivers, intangibles, intercompany financing and the group's overall transfer pricing policies. Groups already preparing an OECD-style master file elsewhere can usually adapt it.

What goes in the local file

The local file covers the UAE entity: its management, business strategy, each material controlled transaction, the functions performed, assets used and risks assumed by each party, the method chosen and the benchmarking or other analysis that supports the price.

When must it be submitted?

The master file and local file are not filed with the return. They must be submitted within 30 days of a request from the Federal Tax Authority (FTA). Thirty days is not enough time to build a local file from scratch, so the file needs to exist by the time the return is filed.

The transfer pricing disclosure form

The disclosure form sits within the corporate tax return and catches far more businesses than the documentation rules. Based on the FTA's Corporate Tax Guide for Tax Returns:

A few points often missed:

• Balance sheet items count. Intercompany loans are reported as asset or liability transactions, so principal flows can push you over AED 40 million.
• Dividends are excluded from the related party schedule.
• Downward adjustments need approval. You can only reduce taxable income for a transfer pricing adjustment after a successful application to the FTA.
• Upward adjustments must be reported even where transactions fall under the thresholds.
• Qualifying Free Zone Persons must confirm in the return that related-party transactions meet the arm's length principle and that transfer pricing documentation is in place.

Who are related parties and connected persons?

Related parties include individuals related to the fourth degree of kinship, entities under common ownership or control of 50% or more, a person and its permanent establishment, and partners in the same unincorporated partnership. Connected persons are owners of the business, directors and officers, and their related parties.

Owner-managed SMEs are the most exposed to the connected-person rules. Salaries, rent, consultancy fees and benefits paid to owners, family members and their companies all need a market-value basis.

A practical documentation plan

1. Map every relationship. Build a register of related parties and connected persons, including family members and their companies. Refresh it each year.
2. Capture transactions by category. Tag intercompany and connected-person entries in your ledger so the disclosure schedules can be produced from the books, not from memory.
3. Test the thresholds early. Measure the AED 40 million and AED 500,000 tests on full-year figures well before the return is due.
4. Choose and support a method. Pick the most appropriate of the five recognised methods for each material transaction and keep the analysis.
5. Write intercompany agreements. Contracts should match what actually happens. The FTA will look at conduct, not just paper.
6. Book adjustments before year-end. Making true-up adjustments in the financial statements is cleaner than manual adjustments on the return.
7. Prepare the files if you are in scope. Have the master file and local file ready when the return is filed, given the 30-day submission window.

Penalties and audit risk

An incorrect return, a transfer pricing adjustment by the FTA and late payment of the resulting tax all carry administrative penalties. Since 14 April 2026, late-paid tax attracts a penalty of 14% a year, accruing monthly. The bigger cost is usually the tax itself on an adjustment the FTA makes when documentation is weak.

For groups that want certainty on recurring transactions, the UAE now offers advance pricing agreements. Our guide to APAs in the UAE explains the threshold and fee.

How GULF CONSULT helps

Our corporate tax and transfer pricing team maps related parties and connected persons, prepares disclosure schedules, and drafts master files, local files and benchmarking studies. Where intangible assets or business transfers are involved, our valuation advisers support the pricing.

Talk to GULF CONSULT

Unsure which transfer pricing rules apply to your business? Book a free 30-minute consultation with GULF CONSULT. Email [email protected], call +971 58 600 4833 or message us on WhatsApp.