Meta description: Learn how to manage related party transactions for corporate tax UAE, meet arm’s length rules, prepare documentation and file before 30 September 2026.
As the 30 September 2026 UAE corporate tax filing deadline approaches, businesses should review more than their revenue, expenses, and taxable income. Related party transactions and payments to connected persons require careful attention because the Federal Tax Authority (FTA) expects these transactions to reflect commercial market conditions.
This guide explains how UAE businesses can identify related party transactions, apply the arm’s length principle, assess the relevant disclosure thresholds, prepare supporting documentation, and reduce common compliance risks before filing.
For this article, we assume a financial year ending on 31 December 2025. Businesses with another financial year-end generally calculate the filing deadline as nine months after the end of the relevant tax period.
Important: This article is for general educational purposes. The application of UAE Corporate Tax and transfer pricing rules depends on each business’s facts, structure, transactions, and documentation.
How to Identify a Related Party Transaction
A related party transaction is generally a transaction or arrangement between parties connected through ownership, control, common management, significant influence, kinship, or another relationship defined under the UAE Corporate Tax Law.
Related parties may include:
- A UAE company and its parent or subsidiary
- Two companies controlled by the same shareholder or group
- Companies with common ownership of 50% or more
- A company and its permanent establishment
- Partners in the same unincorporated partnership
- Certain trusts, foundations, founders, settlors, or beneficiaries
- Individuals connected through specified degrees of kinship or affiliation
Businesses should also identify connected persons. These may include an individual who owns or controls the taxable person, a director or officer, a related party of that director or officer, or a partner in an unincorporated partnership.
Typical controlled transactions include:
- Sales and purchases of goods
- Management, administrative, technical, or marketing services
- Intercompany loans and financing
- Guarantees and cash-pooling arrangements
- Royalties and intellectual property licences
- Cost-sharing and cost-allocation arrangements
- Rent, salaries, bonuses, and benefits provided to owners or directors
- Payments made to an owner-controlled company
A transaction does not stop being related party activity merely because it is domestic, informal, or not supported by a detailed written contract. UAE transfer pricing rules may apply to both domestic and cross-border transactions, including transactions between free zone entities.
Businesses undergoing restructuring or changes in ownership should also review their arrangements. Our business formation support in the UAE can help companies establish clearer ownership, governance, and operating structures from the outset.
How to Apply the Arm’s Length Principle
The arm’s length principle requires a controlled transaction to produce an outcome consistent with what independent parties would have agreed under comparable circumstances.
In practical terms, we ask:
Would an unrelated customer, supplier, lender, landlord, or service provider agree to the same price and conditions?
The analysis should not focus only on the invoice amount. It should consider the commercial substance of the arrangement, including:
- Contractual terms: What are the obligations, payment terms, responsibilities, and rights of each party?
- Functions performed: Who provides the people, decision-making, procurement, sales, logistics, or technical work?
- Assets used: Which party uses equipment, premises, technology, intellectual property, or financial assets?
- Risks assumed: Who bears credit, inventory, market, foreign exchange, product liability, or operational risk?
- Economic circumstances: Are the markets, locations, competition, currency, and timing comparable?
- Business strategy: Is the transaction connected to market entry, expansion, restructuring, or a temporary commercial strategy?
The FTA Transfer Pricing Guide recognises several methods for determining an arm’s length outcome:
- Comparable Uncontrolled Price method
- Resale Price method
- Cost Plus method
- Transactional Net Margin method
- Profit Split method
The most appropriate method depends on the transaction and the reliability of available comparables. For example, an intercompany loan may be tested against comparable third-party financing, while routine support services may be assessed using a cost-based method.
Connected person payments require additional care. A payment or benefit may generally be deductible only to the extent that it is at arm’s length, incurred wholly and exclusively for the business, and not capital in nature.
How to Test the AED 40 Million and AED 4 Million Thresholds
The Transfer Pricing Disclosure Form is submitted with the UAE Corporate Tax return where the applicable disclosure conditions are met.
For related party transactions, businesses should first calculate the aggregate value of relevant transactions during the tax period. Dividends between related parties are generally excluded from the threshold calculation.
The key thresholds are:
- AED 40 million: Aggregate related party transactions exceeding this amount trigger the related party schedule.
- AED 4 million per category: Once the AED 40 million aggregate threshold is exceeded, each transaction category exceeding AED 4 million must be separately disclosed.
Transaction categories may include goods, services, financing, royalties, and other controlled arrangements. Businesses should aggregate transactions across related parties within the same category rather than reviewing each invoice in isolation.
For example, a business may have:
- AED 18 million in related party purchases
- AED 14 million in intercompany services
- AED 10 million in related party loans
- AED 3 million in royalties
The total is AED 45 million, exceeding the AED 40 million aggregate threshold. The purchases, services, and loans categories each exceed AED 4 million and may therefore require separate disclosure. The royalties category does not exceed AED 4 million, although the underlying transaction must still be arm’s length.
A separate threshold applies to connected persons:
- AED 500,000 per connected person: Payments or benefits to an individual connected person, including relevant related parties, exceeding AED 500,000 during the tax period may require disclosure.
Examples may include:
- AED 600,000 in salary, benefits, and management fees paid to an owner
- AED 750,000 rent paid to an owner-controlled property company
- AED 520,000 in combined payments to a director and related entities
The thresholds determine disclosure obligations. They do not remove the arm’s length requirement for transactions below the thresholds.
How to Prepare Documentation Before Filing
Documentation is the practical evidence supporting a business’s tax position. Even when a company does not meet the formal disclosure thresholds, we recommend maintaining reasonable records that explain how related party prices were determined.
A strong supporting file should include:
- Group structure and ownership charts
- List of related parties and connected persons
- Transaction register by counterparty and category
- Written intercompany agreements
- Invoices and payment records
- Functional analysis describing functions, assets, and risks
- Pricing policy or internal transfer pricing policy
- Comparable market data or benchmarking studies
- Calculations supporting the selected transfer pricing method
- Evidence of services performed and benefits received
- Board minutes, emails, workpapers, and approval records
- Reconciliation to the financial statements and Corporate Tax return
The FTA’s Transfer Pricing Guide also refers to contemporaneous documentation. This means businesses should prepare and maintain supporting records at the time of the transaction or, at the latest, before submitting the relevant tax return.
Formal Master File and Local File obligations generally apply where:
- The taxable person’s revenue is at least AED 200 million; or
- The entity is part of a multinational enterprise group with consolidated revenue of at least AED 3.15 billion.
Smaller businesses may not need a formal Local File or Master File, but they should still be able to demonstrate that their transactions are commercially supportable.
Our corporate tax UAE compliance service provides support with Corporate Tax registration, return preparation, taxable income calculations, transfer pricing guidance, and FTA documentation.
How to Recognise Common FTA Red Flags
The FTA may give closer attention to arrangements that lack commercial substance or appear inconsistent with the business’s actual operations.
Common red flags include:
Unsupported management fees
A company pays a large management fee to a group entity, but there is no clear description of the service, evidence of delivery, employee involvement, or measurable business benefit.
Duplicate services
The UAE company already employs its own finance, marketing, or IT team but is also charged for substantially identical services by a related entity without a clear commercial explanation.
Interest-free or undocumented loans
A related party loan has no agreement, repayment schedule, interest analysis, security terms, or explanation of the borrower’s ability to repay.
Persistent losses
The UAE entity consistently reports losses while the wider group remains profitable, without evidence explaining why the local company is appropriately compensated for its functions and risks.
Long-overdue balances
Intercompany receivables remain outstanding significantly beyond normal commercial payment terms. Extended credit may require an arm’s length interest analysis.
Inconsistent records
The transfer pricing disclosure form, financial statements, bank records, invoices, and Corporate Tax return contain different figures or descriptions.
Personal expenses recorded as business costs
Owner or director benefits are recorded as business expenses without demonstrating that they are wholly and exclusively related to the business and priced appropriately.
How to Complete a Practical Pre-Filing Review
Before the September deadline, we recommend the following sequence:
- Create a full transaction register. Include all related party and connected person transactions, not only transactions already identified as “intercompany.”
- Map relationships. Review ownership, control, directors, officers, partners, and family or affiliated relationships.
- Group transactions by category. Separate goods, services, financing, royalties, rent, and other arrangements.
- Test the thresholds. Check AED 40 million in aggregate related party transactions, AED 4 million per category, and AED 500,000 per connected person.
- Review the pricing. Ask whether independent parties would agree to the same terms.
- Perform a functional analysis. Record who performs the work, uses the assets, and assumes the risks.
- Select the appropriate method. Use reliable internal or external comparables where available.
- Correct unsupported positions. Consider adjustments before filing where pricing is outside a reasonable arm’s length range.
- Reconcile the figures. Ensure the disclosure form aligns with the ledger, financial statements, and tax return.
- Retain the evidence. Keep the analysis, contracts, invoices, calculations, and approvals in an organised compliance file.
Businesses should also consider the wider financial impact of their tax records. Accurate Corporate Tax reporting can support future financing, banking, and investment decisions. Our business bank account opening service helps UAE companies prepare structured banking documentation, while our business loan support helps businesses assess eligibility and present consistent financial information to lenders.
How to File by 30 September 2026
For a UAE business with a financial year ending 31 December 2025, the Corporate Tax return and, where applicable, the Transfer Pricing Disclosure Form should be submitted by 30 September 2026.
Before filing, we recommend confirming:
- The correct tax period and filing deadline
- Whether related party transactions exceed AED 40 million in aggregate
- Whether any transaction category exceeds AED 4 million
- Whether payments to any connected person exceed AED 500,000
- Whether all transactions are priced at arm’s length
- Whether the supporting records are complete and consistent
- Whether the tax return and disclosure form agree with the accounts
A proactive review can help SMEs identify errors while there is still time to investigate, document, and correct them. It can also reduce avoidable questions during an FTA review and provide stronger evidence that the business approached its UAE Corporate Tax obligations responsibly.
If your company is newly established or considering a change in structure, our UAE business formation service can help you assess the implications of ownership, jurisdiction, licensing, banking, and future tax compliance before implementation.
Related party transactions do not automatically create a tax problem. The main risk arises when the business cannot explain the relationship, commercial purpose, pricing, benefit, or supporting evidence. By maintaining a transaction register, applying the arm’s length principle, testing the thresholds, and reconciling the filing data, businesses can approach the September deadline with greater confidence.
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