Transfer pricing, related parties and connected persons
Dealings with related companies, owners, directors and their families must be priced as between independent parties. The rules decide what is disclosed and which documents are kept.
Key facts from the law
Transactions between Related Parties must meet the arm's length standard, set by one or more of five transfer pricing methodsCorporate Tax Law, Art. 34
Who is a Related Party (kinship to the fourth degree, 50% ownership or control, common ownership or control)Corporate Tax Law, Art. 35
A payment to a Connected Person (an owner, director or officer, or their Related Party) is deductible only to the extent it is at Market ValueCorporate Tax Law, Art. 36
A disclosure of Related Party and Connected Person transactions may be required with the return; a master file and local file where the Minister's conditions are met; support for arm's length pricing on request within 30 daysCorporate Tax Law, Art. 55
A master file and local file are required where Revenue is AED 200,000,000 or more, or the company is in a multinational group with consolidated Revenue of AED 3,150,000,000 or moreMinisterial Decision 97/2023, Art. 2
The Related Party transactions schedule is completed where all Related Party transactions together exceed AED 40 million; each category above AED 4 million is disclosedFTA Corporate Tax Returns Guide, p. 117
A Connected Persons schedule is completed where transactions with a Connected Person exceed the return's threshold; the market value adjustment is entered on the returnFTA Corporate Tax Returns Guide, p. 86
Each point is checked against the text of the law or FTA guide held by TI.
UAE tax law requires that deals between related businesses (like group companies) be priced as if they were unrelated parties dealing at market rates. If you transact with related parties, you may need to keep records showing your pricing is fair and report this with your tax return.
Article 34 requires Related Party transactions to meet the arm's length standard, tested via specified transfer pricing methods, with the FTA able to adjust Taxable Income (and make a corresponding adjustment to the related party) if results fall outside the arm's length range.
Article 55 allows the FTA to require transfer pricing disclosures with the Tax Return and, where Ministerial-prescribed conditions are met, a master file and local file, plus supporting information within 30 days of request.
FTA guidance explains that both cross-border and domestic Related Party/Connected Person transactions, including between Free Zone Persons, are Controlled Transactions subject to these rules. Based on FTA guidance
It means related companies or people must price their deals with each other as if they were unrelated parties dealing at market rates - not favouring each other for tax reasons.
Article 34(1)-(2) requires transactions between Related Parties to meet the arm's length standard, meaning results consistent with those unrelated parties would have achieved in similar circumstances.
Article 34(3)-(5) sets out the five permitted transfer pricing methods and the factors (contractual terms, characteristics, economic circumstances, functions/assets/risks, business strategies) used to select the most reliable method.
Article 34(8)-(10) empowers the FTA to adjust Taxable Income where the result falls outside the arm's length range, with a corresponding adjustment for the Related Party.
A related party is someone connected to you or your business through family ties, ownership (50% or more) or control - such as close relatives, a shareholder owning half or more of a company, or a company you control. Transactions with them must be priced as if dealing with a stranger.
Article 35(1) of the Corporate Tax Law sets out the categories of Related Parties based on kinship, ownership, control, permanent establishment, partnership and trust relationships.
Article 35(2) defines Control as the ability to exercise 50% or more voting rights, determine 50% or more of the board, receive 50% or more of profits, or otherwise determine or significantly influence the conduct of the business.
Transactions between Related Parties must meet the arm's length standard under Article 34, which can lead to Taxable Income adjustments if pricing is not at arm's length.
For Corporate Tax, a 'connected person' is basically the owner, a director/officer of your business, or a close relative/related company of theirs. Payments to them are only tax-deductible if they're at market rate and genuinely for your business.
Article 36(2)-(4) defines a Connected Person as an owner, director/officer of the Taxable Person, a Related Party of such owner/director/officer, or (for partnerships) fellow partners and their Related Parties.
Article 35 defines 'Related Party' and 'Control' by reference to kinship, ownership thresholds of 50% or more, or the ability to significantly influence the business and affairs of another person.
FTA guidance confirms Connected Person rules apply only to the paying Taxable Person, not the recipient, and that a natural-person Taxable Person's main Connected Persons are fellow partners in an Unincorporated Partnership and their Related Parties. Based on FTA guidance
It's a form you file with your Corporate Tax return listing your dealings with related parties and connected persons, so the FTA can check they're priced fairly.
Article 55(1) allows the FTA to require a Taxable Person to file, with its Tax Return, a disclosure on transactions and arrangements with Related Parties and Connected Persons in a form the FTA prescribes.
FTA guidance explains this disclosure form covers broad categories of Related Party and Connected Person transactions and applies to Taxable Persons above a materiality threshold. Based on FTA guidance
Yes. If you pay a director, that payment is only tax-deductible up to a fair market rate for what they actually did for the business - any excess is not deductible.
Article 36(1) restricts deduction of payments to Connected Persons to the Market Value of the service/benefit provided, incurred wholly and exclusively for the Taxable Person's business.
Article 36(2)(b) defines a Connected Person to include a director or officer of the Taxable Person, as well as Related Parties of that director/officer.
The deductibility must also satisfy the general conditions in Article 28 for deductible expenditure.
The sources given don't say whether a loan between related companies can be interest-free - they only deal with whether interest paid on such loans can be deducted for tax.
Guidance only, not tax advice. Answers were drafted by TI from the FTA’s published law and last updated on 25 September 2026; rely on the official text and a registered tax agent before you file.