UAE corporate tax has been live since June 2023, and transfer pricing is its most demanding chapter. In 2026 the Federal Tax Authority (FTA) has shifted from guidance mode to active enforcement: per a Gulf News business analysis, auditors are now requesting Master File and Local File within risk-based review cycles and allowing 30 days to respond.
What changed in 2026
Up to 2026 many companies treated transfer pricing as a declarative line in the return: tick the related-party box and move on. With the first full corporate tax filing cycle closing (30 September 2026 for standard financial years) the FTA now holds granular data on related-party flows and has begun targeted requests for supporting documentation.
As the Gulf News columnist frames it (4 October 2026), the auditor's question is simple: if a tax position affects the financial statements, where is the evidence? The focus is squarely on alignment of prices with the arm's length principle, supporting agreements, financial reconciliation and the management judgments that shape those prices.
Thresholds: who must prepare Master File and Local File
Ministerial Decision No. 97 of 2023 anchors two thresholds — meeting either one triggers the documentation duty:
- you are part of an MNE Group with consolidated revenue of AED 3.15 billion or more in the tax period (aligned with the OECD EUR 750m CbCR threshold);
- or your UAE taxable person revenue for the period is AED 200 million or more.
If neither threshold is met the Master File and Local File are not required. But the arm's length principle and the duty to disclose related-party transactions in the 9% UAE corporate tax return apply to every taxable person. The practical nuance: not having a Master File does not exempt a business from pricing its related-party transactions at market and being ready to defend them.
What goes into the Master File
- group legal structure, ownership chain, country footprint;
- business model overview, value chain, principal profit drivers;
- intangibles: trademarks, patents, know-how, R&D hubs;
- intra-group financing: loans, cash pools, cross-entity guarantees;
- consolidated financials and a summary of tax positions.
What goes into the Local File
- schedule of related-party and connected-person transactions with volumes;
- functional analysis: who performs which functions, bears which risks and uses which assets;
- method selection and justification (CUP, Resale Price, Cost Plus, TNMM, Profit Split — the five OECD methods adopted in the FTA Guide);
- benchmarking study against comparables with an arm's length range;
- financial reconciliation showing how intercompany amounts tie to the general ledger and the filed tax return.
Thirty days — what it means in practice
The 30-day window does not scale with group complexity. For a multinational with dozens of related parties, assembling a Master File and a Local File from scratch within a month is essentially impossible: the benchmarking study alone (pulling comparables from Orbis, Compustat or Royalstat) runs for weeks.
The practical implication is concurrent documentation: the Master File and Local File must exist on or before the filing date and be refreshed annually. On receipt of a request the business then exports the current package, updates cross-references and submits — not builds from zero. Legacy periods (2024, 2025) filed without documentation deserve a separate retrofit, as adjacent VAT and group structure questions often surface during the same audit.
Penalties and reassessment
Breaches sit in two layers. Administrative penalties under Cabinet Decision 75/2023 (the corporate tax portion) cover failure to maintain and submit records, late disclosure and inadequate registers — fixed amounts. The costlier layer is reassessment: if the FTA concludes that related-party prices are not at arm's length, it applies the 9% corporate tax to the price uplift plus penalties and interest. A voluntary disclosure can reduce the penalty on the adjustment, but not reverse the tax recomputation itself.
What a business should do now
- Inventory related parties and connected persons. Map every entity under common control (50%+), every director and partner, and relatives to the fourth degree. The map is the foundation of everything that follows.
- Cut of transactions with them for the tax period. Loans, royalties, management fees, goods flows, leases, shared services, mainland-to-free-zone dealings.
- Method selection and benchmarking. One method per transaction family, comparables pulled from a reputable database, documented range and conclusions.
- Agreements aligned with actual conduct. The FTA routinely cross-checks the contract text against cash flows and real functions — any gap is a red flag.
- Reconcile the return to the ledger. Disclosures in the CT return must match the Local File and the accounting records.
- A ready Master File + Local File pack on or before the filing date, refreshed every year.
UAE in the OECD orbit
UAE transfer pricing rules are not a local invention. Federal Decree-Law No. 47 of 2022 on Corporate Tax explicitly references the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Two implications follow: for groups experienced in OECD-aligned jurisdictions the UAE logic is familiar; and the perception of a lighter UAE regime that drove some holding redomiciliations no longer applies.
The 2026 enforcement wave is not a tightening of the rules — it is their routine application. Businesses that prepared Master File and Local File ahead of time meet an FTA request with a document export. Businesses that assumed the audit would skip them get 30 days for work that properly takes three to six months — and a tax reassessment by default.
