Since corporate tax took effect, transfer pricing documentation in the UAE has shifted from technical formality to the FTA’s primary enforcement tool. The arm’s length principle determines how related-party transactions should be priced; the master file and local file determine whether those prices can be defended when the FTA asks the question.
Where the Requirements Come From
Documentation obligations rest on Article 55 of Federal Decree-Law No. 47 of 2022, Ministerial Decision No. 97 of 2023 and the FTA’s Transfer Pricing Guide of October 2023. Together they adopt the three-tiered architecture of Chapter V of the OECD Transfer Pricing Guidelines — disclosure form, master file, local file — that anchors the wider UAE transfer pricing framework. Most disputes do not arise because a group selected the wrong method. They arise because the taxpayer cannot show, with contemporaneous evidence, how pricing decisions were reached.
Who Must Prepare the Files
The thresholds are objective and mechanical. A taxable person must prepare both a master file and a local file for a tax period where either its UAE revenue reaches AED 200 million, or it is a constituent company of a multinational enterprise group with consolidated global revenue of AED 3.15 billion or more — the dirham counterpart of the EUR 750 million standard used internationally. There is no discretion based on industry, tax rate or Free Zone status: a Qualifying Free Zone Person that meets a threshold prepares the files exactly as a mainland entity would. One carve-out matters in practice — groups whose entities are all UAE-resident are not expected to prepare a group-level master file, though the local file obligation still applies once a threshold is crossed.
Below the Thresholds: A Common Misconception
Falling under the thresholds removes the formal master file and local file obligation — nothing more. The arm’s length principle still applies to every related-party and connected-person transaction, the disclosure form may still be required with the return, and the FTA’s power to adjust is undiminished. Businesses below the lines must still keep reasonable support showing that intercompany pricing reflects market conditions, and many UAE groups prepare simplified, local-file-style documentation defensively where related-party flows are material or complex.
The Master File: the Group Blueprint
The master file gives the FTA a group-wide view of how value is created: organisational and legal ownership structure, business lines and the value chain, intangibles and where they are developed and owned, intercompany financing arrangements, consolidated financial information and the group’s transfer pricing policies. Its audit function is context-setting — inconsistency between master file and local file undermines credibility immediately. UAE taxpayers often inherit a global master file prepared elsewhere in the group. That works only if the document is current, reflects actual operating reality and is consistent with UAE-specific facts; generic or outdated master files are a recurring source of audit exposure.
The Local File: the UAE Audit Defence
The local file is the document an FTA reviewer will actually work through. It explains the UAE entity: a detailed description of its business, a functional analysis covering functions performed, assets used and risks assumed, a description of each controlled transaction, the selection and justification of the transfer pricing method, benchmarking and comparability analysis, and a financial analysis linking the benchmarks to actual results. It must be transaction-specific and contemporaneous. Recycled benchmarking studies and regional analyses that do not reflect UAE conditions are a false economy — they save the cost of a study and materially increase audit risk in return.
Timing, Production and Retention
Neither file is submitted with the corporate tax return. They are prepared contemporaneously, kept on record and produced only on request — at which point the deadline is 30 days, extendable only with FTA approval. The window is strict, and groups that begin preparing documentation after the request arrives rarely meet it, triggering penalties and starting the audit from a position of weakness. Documentation should then be retained for seven years, in line with the record-keeping obligations of the corporate tax regime — a discipline that belongs inside the routine corporate tax compliance cycle, not outside it.
How the FTA Actually Uses the Files
From an enforcement standpoint the files are risk-screening instruments. The FTA tests consistency between group policy and local outcomes, looks for misalignment between profit and substance, and prioritises taxpayers for deeper review accordingly. The recurring red flags: UAE entities characterised as low-risk yet earning high margins; loss-making entities performing core functions; significant outbound payments without robust benefit analysis; and inconsistency between transfer pricing positions and VAT filings or economic substance notifications. Documentation failures carry administrative penalties, adjustments taxed at 9% and — for Free Zone entities — potential loss of Qualifying Free Zone Person status. In practice, the quality of these files often decides how far an audit escalates.
Frequently Asked Questions
Who must prepare a master file and local file in the UAE?
Any taxable person whose UAE revenue reaches AED 200 million in the tax period, or that is part of a multinational group with consolidated global revenue of AED 3.15 billion or more. Free Zone status provides no exclusion.
Are the files submitted with the corporate tax return?
No. They are maintained on record and produced only if the FTA requests them — within 30 days of the request, unless the FTA approves an extension. The disclosure form, by contrast, travels with the return itself.
Do UAE-only groups need a master file?
Groups with no foreign entities are not expected to prepare a group-level master file. Where the revenue thresholds are met, they should still prepare a local file covering UAE related-party transactions.
What if a business is below both thresholds?
The formal file obligations fall away, but the arm’s length principle does not. The business must still hold reasonable evidence that related-party and connected-person pricing reflects market conditions, and the FTA can still adjust.
How long must transfer pricing documentation be kept?
Seven years, consistent with the broader record-keeping requirements of the UAE corporate tax regime. Retention should cover the benchmarking and financial analysis behind each position, not just the final reports.