Yes. Transfer pricing rules apply to UAE businesses that have transactions with Related Parties and Connected Persons, irrespective of whether the Related Parties or Connected Persons are located in the UAE mainland, a Free Zone or in a foreign jurisdiction.

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”. 

Generally, taxpayers are required to apply one or more of the following methodologies to determine the arm’s length values for transfer pricing purposes:
1. The comparable uncontrolled price method.
2. The resale price method.
3. The cost-plus method.
4. The transactional net margin method.
5. The transactional profit split method.

Businesses will be required to maintain information regarding their transactions with Related Parties and Connected Persons, and certain businesses will be required to submit this information along with their tax return. Businesses that claim small business relief will not have to comply with the transfer pricing documentation rules.

Certain businesses may be requested to maintain a master file and a local file.  

Yes. Transfer pricing rules will apply to all transactions with Related Parties and Connected Persons. Therefore, any loan obtained from (or granted to) a Related Party or Connected Person needs to be at arm’s length (e.g. interest rate, duration, etc.).  

Transactions between members of a Tax Group are eliminated in the consolidation of the Group’s financial results statements and hence do not need to comply with the transfer pricing rules, unless a member of the Tax Group needs to compute its stand-alone Taxable Income for the purposes of utilising Tax Losses incurred before joining the Tax Group or when leaving a Tax Group. 

To be treated as a “Qualifying Free Zone Person”, the Free Zone entity must:
1. Maintain adequate substance in the UAE;
2. Derive “Qualifying Income” as specified in a Cabinet Decision;
3. Comply with transfer pricing rules and maintain the relevant transfer pricing documentation; and
4. Not have made an election to be subject to CT in full.