The Transfer Pricing Regime in the United Arab Emirates

On 31 January 2022, the Ministry of Finance (“MoF”) of the United Arab Emirates (“UAE”) announced that the UAE will introduce a Federal Corporate Tax (“CT”) on business profits that will be effective for financial years starting on or after 1 June 2023.  

On 9 December 2022, the MoF released the Federal Decree-Law No. 47 of 2022, issued on 3 October 2022, on the Taxation of Corporations and Businesses (“CT Law”). In addition, the MoF released 353 Frequently Asked Questions (“FAQs”) to provide guidance on the UAE CT regime. The CT Law will be administered by the Federal Tax Authority (“FTA”). The MoF, on 27 April 2023, released the Ministerial Decision No. 97 of 2023 Requirements for Maintaining Transfer Pricing (“TP”) Documentation; containing the conditions for maintaining a Master File (“MF”) and Local File (“LF”) in compliance with the requirements under the UAE CT regime. 

On 23 October 2023, the FTA issued a comprehensive Transfer Pricing Guide (“Guide”), bringing much-needed clarity for businesses on the application of the arm’s length principle. The document provides detailed guidance and multiple examples that help explain complex TP areas. 
The Guide provides comprehensive guidance on how to apply the TP regulations, however it is not a legally binding document, therefore taxpayers should primarily rely on the CT Law, the Cabinet Resolution 44 of 2020 in relation to the Country-by-Country Reporting, and Ministerial Decision 97 of 2023 in relation to the TP Documentation requirements as referenced in the Guide. 

The Guide is broadly aligned with the Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD Guidelines”), January 2022 and the FTA encourages taxpayers to refer to the OECD Guidelines if an issue is not specifically addressed in the Guide. It offers a good indication of the FTA’s interpretation of key TP issues.

In this document, we provide key highlights from the Guide.