The UAE Federal Tax Authority (FTA) has issued Public Clarification CTP011 on transfer pricing: downward adjustments in the Corporate Tax Return no longer need prior FTA approval — but every one has to be fully disclosed and supported by documentation. Two and a half weeks before the first Corporate Tax deadline, that changes how the return gets prepared.
What happened
On 15 July 2026 the FTA published Public Clarification CTP011 — «Downward adjustments made by a Taxable Person in the Tax Return to comply with the Corporate Tax Law» — on tax.gov.ae. It interprets the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) as it applies to downward transfer pricing adjustments — i.e. adjustments that reduce the taxpayer's taxable income.
What a downward TP adjustment is
The scenario is where a related party transaction has drifted from the arm's length principle in a way that inflates taxable income — for example, the company sold goods to a related party above the arm's length price. To bring the taxable base back to arm's length, the taxpayer books a downward adjustment that reduces income in the return. The reverse case is an upward adjustment.
The key change: no more FTA pre-approval
Before CTP011, the FTA's UAE Transfer Pricing Guide (CTGTP1) and Corporate Tax Return Guide (CTGTXR1) required a successful application to the FTA before a downward adjustment could hit the return. The application procedure itself was never prescribed. The Clarification removes that requirement:
- prior FTA approval for a downward adjustment in the return is not required;
- the system runs on self-assessment — the taxpayer books the adjustment;
- the adjustment remains subject to tax audit — the FTA can revisit it later.
Disclosure: the AED 40M and 4M thresholds are switched off
The usual related party disclosure thresholds in the TP Disclosure Form are AED 40 million in aggregate and AED 4 million for a specific category of transactions. CTP011 is explicit that for downward adjustments those thresholds do not apply: any such transaction is disclosed, regardless of value or nature.
The TP Disclosure Form itself has already been amended. The question previously asked whether aggregate related party transactions exceed AED 40 million; it now separately asks whether «any downward adjustment (irrespective of the AED 40 million threshold) has been made». The instructions for the «Related Party Transaction Schedule» in EmaraTax have been updated in line with the Clarification.
Documentation: what belongs in the TP memorandum
The FTA sets out the minimum working file for supporting a downward adjustment:
- rationale for making the downward adjustment in the Tax Return;
- arm's length analysis including a benchmarking study;
- reconciliation from values recorded in the Financial Statements to the arm's length values reported in the Tax Return;
- evidence of the corresponding (symmetrical) adjustment by the related party.
That sits on top of the general requirements under Ministerial Decision No. 97 of 2023: Local File where standalone revenue is ≥ AED 200 million; Master File where the entity belongs to an MNE group with consolidated revenue ≥ AED 3.15 billion. Both must be produced within 30 days on FTA request and retained for seven years.
Timing: retrospective effect from CT Law implementation
Another important detail is the effective date. The Clarification is effective from the date of implementation of the UAE CT Law — i.e. from the very start of Federal Decree-Law No. 47 of 2022. In practice this means the refined rules apply to the first Corporate Tax returns and not only to future tax periods.
At the same time, the Clarification does not apply to corresponding TP adjustments made by the authority under Articles 34(10) and 34(11) of the Law — those adjustments are initiated by the FTA and follow a separate procedure.
Why this matters right now: 30 September 2026
The Clarification arrives just before the first Corporate Tax deadline. For companies with a financial year 1 January – 31 December 2024, 30 September 2026 is the deadline for the first return filing and tax payment (within nine months of the end of the tax period). Missing the deadline triggers administrative penalties — the mechanics of the first penalty are covered separately in our note on the AED 10,000 Corporate Tax penalty.
CTP011 reshapes how that first return gets prepared:
- if the accounts show any downward TP adjustments, they must be disclosed in the TP Disclosure Form — even when the underlying transactions are small;
- each such adjustment needs a ready-to-produce TP memorandum with rationale, benchmarking and reconciliation to the Financial Statements;
- across the adjustment, evidence of the corresponding adjustment by the related party is required — which may need coordination with the foreign affiliate.
A practical to-do list for the return
- Inventory related party transactions for the tax period — inter-company charges, loans, services, licences, goods flows.
- Screen for downward adjustments. Where the arm's length analysis shows the transaction price inflated taxable income, book the adjustment.
- Prepare the TP memorandum. One document per material adjustment: rationale, benchmarking, reconciliation, evidence of the corresponding adjustment at the counterparty.
- Complete the updated TP Disclosure Form in EmaraTax — now with a separate answer on downward adjustments outside the AED 40 million threshold.
- Test the Master/Local File thresholds under Ministerial Decision No. 97 of 2023 — if you are in scope, the files must be ready for production within 30 days.
Open questions
Some practical points will be refined as practice accumulates:
- How downward adjustments interact with a cross-border context — in particular, potential interplay with bilateral procedures (MAP) under double tax treaties;
- How to handle disclosure for prior periods where downward adjustments did not meet the AED 40 million / AED 4 million thresholds — the Clarification is retrospective, but the mechanics of «catch-up» disclosure are still forming.
Where to verify
- the official page tax.gov.ae → Corporate Tax → Guides, References & Public Clarifications — the underlying CTP011 text and any updates;
- the official page of the Ministry of Finance (mof.gov.ae) — general updates on tax regulation;
- practical commentary from Alvarez & Marsal, Crowe UAE, Dhruva Consultants and Regfollower — independent professional coverage.
This material is informational and does not constitute tax or legal advice. For your specific situation, refer to the underlying CTP011 text on tax.gov.ae and consult your tax adviser.
