On 9 December 2022, the UAE Ministry of Finance (‘MoF’) published the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (‘Law’) and the updated Corporate Tax Frequently Asked Questions (‘FAQs’) section on the UAE Ministry of Finance website. The Law was published in the Official Gazette on 10 October 2022 and comes into effect (15) fifteen days following the date of publication.

In this alert, we focus on the transfer pricing provisions embedded in the Law capturing the following topics:

  • Overview
  • Effective date
  • Related parties and Connected Persons
  • Applicability on taxpayers and scope of transactions
  • Transfer pricing methods
  • TP documentation
  • Corresponding adjustments
  • TP adjustments by FTA
  • Penalties
  • Advanced Pricing Agreements (APAs)


Transfer pricing rules seek to ensure that transactions between Related Parties are carried out on arm’s length terms, as if the transaction was carried out between independent parties.

To prevent the manipulation of taxable income, various articles in the Corporate Tax Law require that the consideration of transactions with Related Parties and Connected Persons needs to be determined by reference to their “Market Value”.  The market value may represent an arm’s length range of financial results or indicators, subject to certain conditions (to be specified in a decision to be issued by the Federal Tax Authority (‘FTA’). 

Effective date

The Law and the FAQs both state that the provisions contained in the Law, including the TP provisions will take effect for financial years starting on or after 1 June 2023.

Related Parties and Connected Persons

The term ‘Related Parties’ has been defined in a very broad manner. When a legal entity or individual has more than 50% of direct or indirect ownership or control over a taxable person, this falls within the related party definition. In addition to ‘related parties’ and ‘connected persons’, the Law also defines ‘control’ as ‘the ability of a person to influence another person’.

Further details on this can be found in Article 35 of the Law.

Applicability on taxpayers and scope of transactions

  • Transactions between domestic related parties as well as transactions between mainland and free zone entities are all covered within the scope of the Law.
  • A non-resident person, through a Permanent Establishment in the UAE, would also be subject to the UAE TP provisions and therefore would be required to maintain and submit the relevant TP documentation.
  • Transactions carried out between different business lines of an Exempt Person (e.g. an exempt business and a non-exempt business of an Exempt Person) should also be carried out in accordance with the arm’s length principle. Refer Article 5.5 / Article 6.5 / Article 7.5 / Article 8.5 of the Law for details. 

Transfer pricing methods

For the purpose of the application of the arm’s length principle, the Law sets forth five transfer pricing methods (by applying one or a combination), broadly in line with the OECD Transfer Pricing Guidelines.

  • Comparable Uncontrolled Price Method
  • Resale Price Method
  • Cost Plus method
  • Transactional Net Margin Method
  • Transactional Profit Split Method

In case neither of these methods can be reasonably applied, the Law allows for the application of any other transfer pricing method to the extent that it would lead to an arm’s length result. 

TP documentation

  • Certain businesses will be required to submit a disclosure containing information regarding their transactions with Related Parties and Connected Persons along with their tax return.
  • Certain businesses may be requested to maintain a master file and a local file.
  • The FTA may seek a taxpayer to provide a copy of their Master File or Local File or any information to support the arm’s length nature at any time by issuing a notice of not less than 30 days.
  • Threshold and format of the master file and a local file to be prescribed by the FTA.
  • The FAQs state that businesses which claim small business relief will not have to comply with the transfer pricing documentation rules.

Corresponding adjustments

In the event of an adjustment imposed by a foreign tax authority which impacts a UAE entity, an application must be made to the FTA for a corresponding adjustment to provide the UAE company with relief from double taxation. A corresponding adjustment related to a domestic transaction does not require this type of application.

TP adjustments by the FTA

While making any TP adjustments to the tax base of taxable persons, the FTA would need to rely on information that can or will be made available to the Taxable Person. 


No specific penalties for non-compliance of TP documentation requirements or non-submission of such information have been set out in the Law. However, we expect that penalties for non-compliance would be in line with those applicable under the Tax Procedures Law of 2017. 

Advanced Pricing Agreements (APAs)

An APA is an approach that attempts to prevent transfer pricing disputes from arising by determining criteria for applying the arm's length principle to transactions in advance of those transactions taking place. The law provides that APAs will be exploitable, through the regular clarification process that is already in place.

What should businesses expect?

In the future, UAE businesses will need to comply with internationally accepted transfer pricing documentation requirements, in the form of a TP disclosure, Master file, and a Local file in addition to the Country-by-Country Report requirements currently in place. The Law does not provide any materiality thresholds, but it is expected that the MoF will issue further guidance / clarification in this respect. It is recommended that entities look into their business arrangements from a transfer pricing perspective and start preparing related documentation.

You may access the Law and the FAQs pertaining to the Law here and here respectively.

How can we help?

KPMG’s tax team’s deep knowledge of transfer pricing and corporate tax, combined with familiarity with local and regional legal frameworks, allows us to help you navigate the requirements set out in the Law.

We are happy to discuss your specific circumstances with you and determine the way forward. Should you have any questions, please get in touch with your usual KPMG contact or any of the tax professionals mentioned on this page. 

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