Transfer Pricing

What is Transfer Pricing?

Transfer pricing governs the pricing of transactions between related parties—covering goods, services, loans, and intangibles. It ensures these transactions are conducted at arm’s length, as if between unrelated entities, in line with OECD standards. The objective is to prevent profit shifting and preserve tax fairness. With the UAE aligning closely with international norms, transfer pricing compliance is now integral to corporate tax management.

Scope of Transfer Pricing in the UAE

UAE transfer pricing rules apply to a broad range of transactions:

• Cross-border and domestic dealings between related parties, including free zone entities

• Intra-government transactions, whether mandated or not

• Exempt entities must apply arm’s length principles, but are not required to maintain local/master files

Who Are Related Parties and Connected Persons?

Related Parties
As per Article 35(1), related parties are individuals or entities linked through ownership, control, or kinship. This includes business partners, trusts, and permanent establishments.

Connected Persons
Connected persons include directors, significant owners, and close relatives (up to the fourth degree). Payments to such persons must reflect arm’s length values to be deductible.

Controlled Transactions

Controlled transactions involve related or connected parties. These include:

• Transfer of goods

• Provision of services

• Financing arrangements

• Licensing of intangible assets

Both cross-border and domestic transactions are subject to transfer pricing compliance.

Arm’s Length Principle in the UAE

Article 34 mandates that related party transactions follow the arm’s length principle—pricing must match that of independent entities under similar conditions. The UAE adopts OECD-approved methods to determine arm’s length pricing, with flexibility for alternative approaches when necessary.

Transfer Pricing Methods

Traditional Transaction Methods

• Comparable Uncontrolled Price (CUP)

• Resale Price Method

• Cost Plus Method

Transactional Profit Methods

• Profit Split Method

• Transactional Net Margin Method (TNMM)

Transfer Pricing Services at Nexoviz

Transfer Pricing Assessment
Evaluate intercompany transactions to ensure alignment with UAE tax standards and reduce risk exposure.

Impact Assessment
Understand how transfer pricing affects financials, compliance, and strategic planning. Identify risks and optimization opportunities.

Documentation & Compliance

Transfer Pricing Disclosure Form
Mandatory if related party transactions exceed thresholds:

• AED 40 million (aggregate)

• AED 4 million (by category)

• AED 500,000 (per connected person)

Local File
Detailed reports on each intercompany transaction, pricing methods, and benchmarking analysis.

Master File
Group-level overview covering structure, income distribution, and global activities.

Country-by-Country Report (CbCR)
Summarizes income, taxes paid, and economic activity across jurisdictions.

Benchmarking Analysis

Benchmarking compares your intercompany transactions with similar third-party deals. Nexoviz uses leading tools to:

• Determine acceptable pricing ranges

• Validate transfer pricing strategies

• Support regulatory compliance

Why Nexoviz?

• Specialized Expertise in UAE and global tax frameworks

• In-depth Analysis across tax structures and intercompany policies

• Strategic Planning aligned with Pillar Two and DMTT requirements

• Full Compliance Support, including documentation, APA assistance, and FTA reviews

• Data-Driven Benchmarking with industry-grade software