Introduction
As UAE Corporate Tax moves into its second filing cycle, transfer pricing has quietly become one of the areas where businesses are most likely to have a compliance gap they don’t know about. The rules apply more broadly than many businesses assume — including to transactions between a mainland entity and its own free zone affiliate.
The Rule That Catches Businesses Off Guard
Under Articles 34 to 36 of the UAE Corporate Tax Law, all transactions between related parties and connected persons must be priced on an arm’s length basis — as if the parties were unrelated and dealing at market terms. Critically, this isn’t limited to cross-border, multinational structures. It applies equally to intra-UAE transactions, including pricing between a mainland company and its related free zone entity.
For groups that have structured operations across a mainland and free zone entity for cost or tax reasons, this means the pricing between those two entities needs to be defensible on its own terms — not simply convenient for the group’s overall tax position.
Who Actually Needs a Master File and Local File
Formal documentation requirements — a Master File and Local File — apply where either of the following is met:
The UAE taxable person has standalone revenue of AED 200 million or more in the relevant tax period, or
The taxable person is part of a multinational enterprise (MNE) group with global consolidated revenue of AED 3.15 billion or more
There’s a useful carve-out: groups that operate entirely within the UAE, with no foreign entities, are not required to prepare a Master File — though the Local File requirement still applies if the AED 200 million revenue threshold is met on its own.
Get Your Transfer Pricing Position Documented Properly with MNK Group
Transfer pricing exposure tends to surface at the worst possible time — during an FTA audit, with a 30-day clock already running. MNK Group’s tax team can assess whether your business meets the documentation thresholds, prepare a Master File and Local File that will hold up to FTA scrutiny, and make sure your free zone qualifying income stays properly protected.
Contact MNK Group to review your transfer pricing documentation before the FTA asks for it.
