Related party transactions in the UAE corporate tax regime explained

What are related party transactions in the UAE?

Related party transactions in the UAE are dealings between two or more persons linked by ownership, control, or family ties under Federal Decree-Law 47 of 2022. These transactions must follow the arm's length principle, meaning the price must match what independent parties would agree to. The Federal Tax Authority (FTA) requires disclosure and supporting documentation.

Every UAE business inside the corporate tax net needs to map its related party transactions UAE rules carefully. The Federal Tax Authority (FTA) treats these dealings as a high risk area because owners can shift profit between group companies, family members, or controlled entities. Getting it wrong triggers tax adjustments and penalties.

This guide explains who counts as a related party, how the arm's length principle applies, what to disclose on the corporate tax return, and which documentation thresholds apply. It sits inside our wider UAE Corporate Tax hub, which covers registration, rates, and filing dates.

Who is a related party under UAE corporate tax?

Article 35 of Federal Decree-Law 47 of 2022 defines related parties. The test looks at ownership, control, and family relationships. If any of these links exist, the parties are related and their transactions need arm's length pricing.

Ownership and control test

Two juridical persons are related if one owns, directly or indirectly, at least 50% of the other. They are also related if a third person owns at least 50% of both, or controls both. Control means the ability to direct decisions, vote 50% or more of the shares, or appoint the majority of directors.

Family relationships

Natural persons are related to relatives within the fourth degree of kinship or affiliation. That includes parents, children, siblings, grandparents, grandchildren, uncles, aunts, nieces, nephews, and first cousins. Adoption and guardianship also count. Spouses are related.

Related parties at a glance

Type	Relationship	Example
Natural to natural	Within 4th degree of kinship or affiliation	Parent and child, cousins, in-laws
Natural to juridical	50% or more ownership or control	Owner and their LLC
Juridical to juridical	Common 50% ownership or control	Two subsidiaries of the same parent
Partnership	Partners in an unincorporated partnership	Two architects in a joint practice
Trustee or settlor	Trust and its trustee, settlor, or beneficiary	Family trust and the founder
Branch or PE	Person and its permanent establishment	UAE head office and Dubai branch

Related parties versus connected persons

The corporate tax law uses two different terms. Related parties cover the wider group of linked persons described above. Connected persons are a narrower group focused on payments to owners, directors, and their relatives. The rules overlap but the consequences differ.

For a full breakdown of the second concept, read our guide on Connected Persons UAE Corporate Tax. The short version: connected persons rules limit deductible payments such as salaries or rent to market value, while related party rules cover all cross border and domestic transactions between linked entities.

The arm's length principle in practice

Article 34 of the corporate tax law requires every related party transaction to be priced at arm's length. The price must reflect what unrelated parties would agree to in similar conditions. The FTA can adjust taxable income if it finds the pricing is off.

The five accepted methods

The law allows the same five methods used in OECD guidance:

1. Comparable Uncontrolled Price (CUP) method.
2. Resale Price method.
3. Cost Plus method.
4. Transactional Net Margin Method (TNMM).
5. Transactional Profit Split method.

If none of the five fit the facts, a sixth approach is allowed if it produces a reliable arm's length result. Your choice should match the transaction type, the functions performed, and the data available.

Common transaction types

Typical related party transactions in UAE groups include:

• Sale of goods between a UAE trading company and a foreign affiliate.
• Management fees charged by a parent to its subsidiary.
• Intra group loans and guarantees.
• Royalties for use of trademarks or software.
• Cost sharing for shared services such as IT or HR.
• Secondment of staff between group entities.

Our detailed guide on UAE Transfer Pricing Rules walks through method selection and benchmarking for each of these.

Disclosure on the corporate tax return

Every taxable person must file a corporate tax return within 9 months of the end of the financial year. If the business had related party transactions during the period, it must complete a disclosure form alongside the return.

The transfer pricing disclosure form

The disclosure form reports aggregate values of transactions with related parties and connected persons. It lists the counterparties, the nature of each transaction, the amount, and the transfer pricing method used. It is filed online through the EmaraTax portal.

Materiality thresholds apply. Ministerial Decision 97 of 2023 sets the de minimis levels below which transactions do not need to be reported on the disclosure form. Above those levels, every category needs entries.

Penalties for non disclosure

Tax procedures penalties apply to missing or late filings. Adjustments to taxable income can also lead to underpaid tax, interest, and administrative fines under the tax procedures law, Federal Decree-Law 17 of 2024.

Documentation requirements

Some taxpayers need to keep formal transfer pricing documentation. Ministerial Decision 97 of 2023 sets two triggers for the master file and local file requirement.

Who needs a master file and local file

Trigger	Threshold	Files required
Multinational group	Consolidated group revenue of AED 3.15 billion or more	Master file and Local file
Standalone UAE taxpayer	Revenue of AED 200 million or more in the tax period	Master file and Local file
Below thresholds	Smaller groups and standalone entities	Disclosure form only, plus supporting records

Even taxpayers below the thresholds must keep records that prove their related party prices are at arm's length. The FTA can request this evidence during an audit.

Read more in our guides on UAE Transfer Pricing Documentation, Transfer Pricing Master File UAE, and Transfer Pricing Local File UAE.

Country by Country Reporting

Large multinational groups headquartered in the UAE also file a Country by Country Report. The threshold is consolidated group revenue of AED 3.15 billion. See our CbCR UAE guide for the filing process.

How to prepare: a practical checklist

Use this checklist to get your related party transactions ready for the corporate tax return:

1. List every entity and individual that meets the related party test.
2. Map every transaction with those parties during the financial year.
3. Group transactions by type: goods, services, royalties, loans, cost sharing.
4. Select a transfer pricing method for each category.
5. Benchmark each category against comparable data.
6. Document the analysis in a file note or full local file as required.
7. Reconcile totals with the trial balance and the disclosure form.
8. Keep board minutes and contracts that support the pricing.

Worked example: management fee

A UAE holding company charges its operating subsidiary AED 1,200,000 a year as a management fee. To meet the arm's length test the holding company should:

• Identify the services delivered, such as finance, HR, and legal support.
• Track the costs incurred to deliver those services.
• Apply a markup that independent providers would charge, often 5% to 10% on routine services.
• Record an intercompany services agreement signed before the year started.
• Keep invoices, timesheets, and proof of benefit to the subsidiary.

If the FTA finds the fee is inflated or undersupported, it can disallow part of the deduction in the subsidiary and tax the surplus in the holding company.

Common mistakes to avoid

• Treating free zone entities as outside the rules. Qualifying Free Zone Persons (QFZP) still need to meet the arm's length principle on all related party transactions.
• Forgetting domestic transactions. The rules apply within the UAE, not only cross border.
• Pricing intra group loans at zero interest without an analysis.
• Missing the disclosure form because each transaction looks small in isolation.
• Using last year's benchmarking without refreshing the data.

Official sources

For the underlying law and guidance, see the UAE Ministry of Finance and the UAE Federal Tax Authority. The FTA publishes transfer pricing guides that explain the disclosure form and documentation requirements in detail.

Mapping related party transactions is one piece of the wider corporate tax workload. Our UAE Corporate Tax hub links to every supporting topic, from registration through to filing.

If you are also preparing for UAE e-invoicing, EInvoice Direct gives you software with an accredited service provider (ASP) included at no extra charge, ready for the Phase 1 go-live on January 1, 2027. Get UAE e-invoicing pricing to see how it fits your finance stack.