Documentation — how a transfer pricing position is proven

A transfer pricing position is tested through its documentation. However sound the underlying pricing, it is the written record that demonstrates the arm's length standard has been met. Where the Local File, Master File, Disclosure Form and benchmarking present one consistent account, they close an enquiry before it develops; where they diverge, the inconsistencies invite examination.

UAE documentation falls into two groups, and this service covers six deliverables across them, each with its own page. The substantive documentation evidences a position — the transfer pricing policy, the benchmarking study, and the Local and Master File. The regulatory filings are those the law requires — the Transfer Pricing Disclosure Form, submitted with the annual Corporate Tax return, and, for the largest groups, Country-by-Country Reporting. We prepare both and keep them consistent with one another.

The Disclosure Form's related party schedule applies where aggregate related party transactions exceed AED 40 million, with each category above AED 4 million itemised; the connected person schedule applies at AED 500,000. The Local File and Master File apply at AED 200 million of entity revenue, or membership of an MNE group with AED 3.15 billion of consolidated revenue; Country-by-Country Reporting applies to a UAE-resident Ultimate Parent Entity at the same AED 3.15 billion.

A purely domestic group can cross AED 200 million and owe a Local File without a Master File, since the latter is triggered by multinational membership. The files are not filed with the return but must be produced within 30 days of an FTA request. Even below every threshold, arm's length pricing must still be demonstrable — the obligation to price at arm's length does not depend on the obligation to document it.

Substantive documentation

  • Transfer Pricing Policy — the written record of how the group prices its intra-group transactions, and why that basis is arm's length.
  • Benchmarking Study — the economic analysis that establishes and defends the arm's length range.
  • Local File — the entity-level record of a UAE company's transactions and their arm's length basis.
  • Master File — the group-level account of the multinational's business, structure and policies.

Regulatory filings

  • Transfer Pricing Disclosure Form — the schedule filed with the Corporate Tax return; the obligation that reaches the widest range of businesses.
  • Country-by-Country Reporting (CbCR) — the group-level report required of the largest UAE-headquartered MNE groups.
Year-end true-ups and adjustments

Documentation also governs the adjustments made at year-end. Where actual results diverge from the arm's length outcome the policy intends, a true-up brings the position back into line — cleanest before the accounts close, or otherwise through an adjustment in the return.

Recent FTA guidance has sharpened what a return adjustment requires: a downward adjustment is now self-assessed rather than pre-approved, but must be disclosed regardless of the usual thresholds and supported by a contemporaneous file — rationale, benchmarking, a book-to-arm's-length reconciliation, and evidence of the counterparty's corresponding position. We help businesses set a consistent true-up policy, execute year-end adjustments correctly, and hold the evidence behind them.

The UAE position