Payments of AED 500k or more <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nWhat are the compliance obligations for entities below the UAE Local File threshold? <\/h2>\n\n\n\n Organisations that don\u2019t meet the formal Local File thresholds aren\u2019t entirely exempt from transfer pricing compliance. The FTA expects all entities engaged in related party transactions to maintain defensible documentation. <\/p>\n\n\n\n
Minimum documentation standards <\/strong><\/p>\n\n\n\nEven if you’re exempt from the Local File requirement, your organisation must: <\/p>\n\n\n\n
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\nFollow the arm’s length principle for all related party transactions <\/li>\n<\/ul>\n\n\n\n\nMaintain reasonable documentation to prove your pricing is fair <\/li>\n<\/ul>\n\n\n\n\nBe ready to provide information to the Federal Tax Authority (FTA) within 30 days if requested <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\nYour Situation<\/strong> <\/th>Local File Required?<\/strong> <\/th><\/tr><\/thead>UAE entity revenue \u2265 AED 200M <\/td> YES <\/td><\/tr> Part of the MNE group with revenue \u2265 AED 3.15B <\/td> YES <\/td><\/tr> UAE entity revenue < AED 200M AND not part of MNE group <\/td> NO (but maintain basic documentation) <\/td><\/tr> Exempt entity or Small Business Relief <\/td> NO <\/td><\/tr> Tax Group that collectively meets thresholds <\/td> YES (one consolidated Local File) <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nWhat should be included in a compliant UAE Local File? <\/h2>\n\n\n\n If you do need to prepare a Local File, here’s what it should contain in line with UAE transfer pricing regulations and OECD guidance: <\/p>\n\n\n\n
1. Business Overview: <\/strong>The FTA needs context to understand your entity’s role within the broader group structure and evaluate whether your profit allocation is appropriate. <\/p>\n\n\n\n\n
\nDetailed business description of your UAE entity <\/li>\n<\/ul>\n\n\n\n\nOrganisational structure and management hierarchy <\/li>\n<\/ul>\n\n\n\n\nCompetitive landscape and market positioning analysis\u202f <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
2. Related Party Transactions: <\/strong>This section proves you’ve identified and documented every related party dealing, leaving no gaps for the FTA to question. <\/p>\n\n\n\n\n
\nDetailed list of all transactions with related parties <\/li>\n<\/ul>\n\n\n\n\nTransactions categorisation (tangible goods, services, financing, etc.) <\/li>\n<\/ul>\n\n\n\n\nQuantitative analysis including transaction values and volumes <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
3. Functional Analysis: <\/strong>Your functional and risk profile directly determines your expected profit level. This analysis justifies why your entity earns its reported profit margin. <\/p>\n\n\n\n\n
\nFunctions performed by your company <\/li>\n<\/ul>\n\n\n\n\nRisks assumed in business operations <\/li>\n<\/ul>\n\n\n\n\nAssets employed and their contribution to value creation <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
4. Financial Information: <\/strong>Financial data grounds your transfer pricing analysis in actual results, allowing benchmarking against comparable independent enterprises. <\/p>\n\n\n\n\n
\n\u202fIncome statement items related to controlled transactions <\/li>\n<\/ul>\n\n\n\n\nBalance sheet positions affected by intercompany dealings <\/li>\n<\/ul>\n\n\n\n\nRelevant financial ratios and performance indicators <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
5. Transfer Pricing Methods<\/strong>: This is the core technical section of your Local File, showing that your pricing method is robust and produces arm’s length results according to UAE transfer pricing regulations. <\/p>\n\n\n\n\n
\nWhich pricing method you used (more on this below) <\/li>\n<\/ul>\n\n\n\n\nWhy this method is appropriate <\/li>\n<\/ul>\n\n\n\n\nBenchmarking analysis showing your pricing is at arm’s length\u202f <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
6. Benchmarking Study and Arm’s Length Analysis: <\/strong>The benchmarking study provides objective market evidence that your profit margins align with independent enterprises performing similar functions. <\/p>\n\n\n\n\n
\nDatabase searches performed to identify comparables <\/li>\n<\/ul>\n\n\n\n\nSelection criteria applied (industry, geography, functions) <\/li>\n<\/ul>\n\n\n\n\nRejected comparables with rejection rationale <\/li>\n<\/ul>\n\n\n\n\nFinancial metrics of selected comparables <\/li>\n<\/ul>\n\n\n\n\nInterquartile range analysis <\/li>\n<\/ul>\n\n\n\n\nPositioning of your entity within the arm’s length range <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
7. Supporting Documentation: <\/strong> <\/strong> <\/p>\n\n\n\n\n
\nIntercompany agreements and contracts <\/li>\n<\/ul>\n\n\n\n\nTransaction invoices and payment records <\/li>\n<\/ul>\n\n\n\n\nBoard resolutions and policy documents supporting pricing decisions\u202f <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
The five OECD transfer pricing methods used for your Local File <\/h2>\n\n\n\n The UAE follows internationally recognised transfer pricing methods. Here are the five main approaches: <\/p>\n\n\n\n
1. Comparable Uncontrolled Price (CUP) Method <\/strong><\/p>\n\n\n\nCompares the price in your related party transaction to prices in similar transactions between unrelated parties. This is considered the most direct method when comparable data is available.
Local File Requirements:<\/strong> Identify external comparable transactions, document comparability factors, and explain any adjustments needed. <\/p>\n\n\n\n2. Resale Price Method <\/strong><\/p>\n\n\n\nUsed when you buy from a related party and resell to an independent party. You work backwards from the resale price, deducting an appropriate margin.
Local File Requirements:<\/strong> Benchmark gross margins of comparable distributors, explain functional differences, and justify your entity’s margin. <\/p>\n\n\n\n3. Cost Plus Method <\/strong><\/p>\n\n\n\nAdds suitable markup to the expenses borne by the provider of goods or services. Commonly used for manufacturing or service providers.
Local File Requirements<\/strong>: Document cost-based calculation, benchmark markups of comparable manufacturers\/service providers, and explain value drivers. <\/p>\n\n\n\n4. Transactional Net Margin Method (TNMM) <\/strong><\/p>\n\n\n\nAnalyses the net profit margin in relation to a relevant base, such as expenses, revenue, or assets, produced from a controlled transaction.
Local File Requirements: <\/strong>Select appropriate profit level indicator (operating margin on sales, return on assets), identify comparable companies, and perform statistical analysis. <\/p>\n\n\n\n5. Profit Split Method <\/strong><\/p>\n\n\n\nDivides the combined profits from controlled transactions between related parties based on their relative contributions. <\/p>\n\n\n\n
Local File Requirements:<\/strong> Document value contribution analysis, establish profit allocation keys, and demonstrate economic rationale for split. <\/p>\n\n\n\nWhich method should you use? <\/em><\/strong> <\/p>\n\n\n\nIt depends on your specific transactions. Most companies find TNMM to be the most practical approach, but it is recommended to work with a transfer pricing expert to determine the best approach.<\/em> <\/p>\n\n\n\nWhen must your local file be ready? <\/h2>\n\n\n\n Timing is essential for Local File compliance. Knowing preparation and submission deadlines helps prevent penalties under UAE transfer pricing regulations.<\/strong> <\/p>\n\n\n\nContemporaneous documentation requirement<\/strong> <\/p>\n\n\n\nYour Local File must be contemporaneous, meaning it should be prepared: <\/p>\n\n\n\n
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\nWhen the controlled transactions occur, or <\/li>\n<\/ul>\n\n\n\n\nBy the time you file your Corporate Tax return (within 9 months after the financial year-end) <\/li>\n<\/ul>\n\n\n\n<\/p>\n<\/div>\n\n\n\n
Practical Implication:<\/strong> Don’t wait until the FTA requests your Local File. The documentation must already exist by your tax return deadline. <\/p>\n\n\n\nSubmission timeline to the FTA<\/strong> <\/p>\n\n\n\nThe Local File is not automatically filed with your tax return. Instead: <\/p>\n\n\n\n
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\nThe FTA may request your Local File during an audit or inquiry <\/li>\n<\/ul>\n\n\n\n\nYou have 30 days from the FTA request date to submit your complete Local File <\/li>\n<\/ul>\n\n\n\n\nExtensions may be granted only in limited circumstances <\/li>\n<\/ul>\n<\/div>\n\n\n\n<\/p>\n\n\n\n
Key Dates for 2025-2026 Filing Cycle <\/strong><\/p>\n\n\n\nMilestone<\/strong> <\/th>Date<\/strong> <\/th>Action Required<\/strong> <\/th><\/tr><\/thead>Financial Year End <\/td> December 31, 2025 <\/td> Ensure all transaction data is captured <\/td><\/tr> Tax Return Filing <\/td> September 30, 2026 <\/td> Submit Corporate Tax return with Disclosure Form <\/td><\/tr> CbC, Local File, Master File <\/td> 30 January 2027 <\/td> Submit all CbC reports (including Local File and Master File) to ATO <\/td><\/tr> Local File Submission (on request) <\/td> Within 30 days of FTA request <\/td> Provide complete Local File documentation <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nBest Practice: Complete your Local File before your external audit concludes, as transfer pricing adjustments must be reflected in your audited financial statements. <\/p>\n\n\n\n
Distinguishing between the Transfer Pricing Disclosure Form and Local File <\/h2>\n\n\n\n Here’s where people often get confused \u2013 the Disclosure Form and the Local File are two different things in the UAE transfer pricing<\/strong> framework: <\/p>\n\n\n\nTransfer Pricing Disclosure Form<\/strong> <\/th>Local File<\/strong> <\/th><\/tr><\/thead>Must be submitted with your corporate tax return. <\/td> Only submitted when the FTA requests it. <\/td><\/tr> Required if your total related party transactions exceed AED 40 million <\/td> Preparation of a Local File is necessary if the entity\u2019s annual revenue is equal to or greater than AED 200 million, or if the group\u2019s global consolidated revenue is equal to or greater than AED 3.15 billion for the relevant tax period. <\/td><\/tr> Due within 9 months after your financial year ends <\/td> Must be submitted within 30 days of the FTA request <\/td><\/tr> Directly filing with the FTA <\/td> More detailed than the Disclosure Form <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nCan you do with one without the other? <\/strong><\/p>\n\n\n\nYes. You might need to file a Disclosure Form (if transactions exceed AED 40M) without requiring a Local File (if you’re below revenue thresholds), or vice versa. <\/p>\n\n\n\n
Special Situations: Free Zones, Tax Groups, and Small Businesses <\/h2>\n\n\n\n Certain organisational structures face unique transfer pricing considerations within the UAE framework <\/p>\n\n\n\n
UAE Tax Groups: Compiled Local File approach <\/strong><\/p>\n\n\n\nIf multiple UAE entities form a Tax Group for Corporate Tax purposes, you benefit from simplified documentation: <\/p>\n\n\n\n
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\nPrepare one compiled Local File covering all Tax Group members <\/li>\n<\/ul>\n\n\n\n\nThreshold assessment applies to the Tax Group as a whole <\/li>\n<\/ul>\n\n\n\n