# Transfer pricing local file UAE: what businesses must prepare

> The transfer pricing local file UAE rules explain who must prepare it, what to include, and deadlines under Corporate Tax.

Source: https://einvoicedirect.ae/uae-corporate-tax/transfer-pricing-local-file-uae  
Last updated: 2026-06-05  
Publisher: EInvoice Direct (Massive FZCO), UAE e-invoicing software.

## What is the transfer pricing local file UAE?

The transfer pricing local file UAE is a detailed report on a taxpayer's related party and connected person transactions inside the UAE Corporate Tax regime. It documents the taxable person's business, the controlled transactions, and the arm's length analysis. It supports Article 55 of Federal Decree-Law 47 of 2022 and must be ready to submit on request from the Federal Tax Authority (FTA).

If your group has cross-border or intra-group dealings, the local file sits at the heart of your [UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax) compliance file. It works alongside the master file and country-by-country report to show the FTA that your prices follow the arm's length principle. This guide explains who needs one, what it must contain, thresholds, deadlines, and practical steps for finance teams.

## Who must prepare a transfer pricing local file in the UAE

Ministerial Decision 97 of 2023 sets the thresholds. A taxable person must keep both a master file and a local file if either of these tests is met in the relevant tax period.

- The taxable person is a constituent company of a multinational enterprise (MNE) group with consolidated group revenue of AED 3.15 billion or more in the relevant period.
- The taxable person itself has revenue of AED 200 million or more in the relevant tax period.

Below these thresholds, you still need to apply the arm's length principle and keep adequate records, but a formal local file is not required. The FTA can still ask for supporting evidence on related party transactions.

### Which transactions go into the local file

The local file does not cover every related party transaction. Ministerial Decision 97 of 2023 narrows the scope to transactions with specific counterparties. Include transactions with:

- Non-resident persons.
- Exempt persons under UAE Corporate Tax.
- Resident persons that elected for Small Business Relief.
- Resident persons taxed at a different Corporate Tax rate than the taxable person, including a Qualifying Free Zone Person (QFZP) taxed at 0% on qualifying income.

Transactions with ordinary UAE resident related parties taxed at the same 9% rate are generally excluded from the local file scope. For full context on counterparty definitions, read our guides on [Related Party Transactions UAE](https://einvoicedirect.ae/uae-corporate-tax/related-party-transactions-uae) and [Connected Persons UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax/connected-persons-uae-corporate-tax).

## What goes inside the transfer pricing local file UAE

The contents follow OECD Transfer Pricing Guidelines, Chapter V, Annex II, with UAE-specific overlays. The file must give the FTA a clear picture of the local entity and each controlled transaction. Group the content into three sections.

### Section 1: information about the local entity

- A description of the management structure, including local reporting lines to regional or head office.
- Detailed business and strategy description for the UAE entity.
- Key competitors in the UAE market.
- Any business restructurings or intangible transfers in the current or prior year affecting the entity.

### Section 2: controlled transactions

For each material category of controlled transaction, include:

- A description of the transaction and the context.
- The amount of intra-group payments and receipts, split by tax jurisdiction of the foreign payer or recipient.
- Identification of associated enterprises involved and their relationship.
- Copies of all material intercompany agreements.
- A functional and risk analysis of the taxpayer and the related counterparties.
- The most appropriate transfer pricing method selected and the reasons.
- The tested party and the rationale for that choice.
- A summary of important assumptions.
- Reasons for any multi-year analysis.
- A list of comparable transactions, the search strategy, and financial indicators used.
- A description of comparability adjustments performed.
- The conclusion on whether the transaction price is arm's length.
- Financial information used in applying the method.

### Section 3: financial information

- Annual financial accounts of the UAE entity for the period.
- Schedules showing how financial data used in the method ties back to the financial statements.
- Summary schedules of relevant financial data for comparables and sources.

## Thresholds, scope, and deadlines at a glance

| Item | Requirement |
| --- | --- |
| Local file threshold (entity) | Revenue of AED 200 million or more in the tax period |
| Local file threshold (group) | MNE group consolidated revenue of AED 3.15 billion or more |
| Format | Local file and master file, prepared per OECD Chapter V |
| Submission | On written request from the FTA, within 30 days of the request |
| Preparation deadline | By the Corporate Tax return filing date, within 9 months of financial year end |
| Disclosure form | Transfer pricing disclosure form filed with the Corporate Tax return |
| Legal basis | Article 55, Federal Decree-Law 47 of 2022, Ministerial Decision 97 of 2023 |

### How the local file fits with other transfer pricing documents

The UAE transfer pricing documentation set has four layers. Each plays a different role.

- **Disclosure form:** filed with the annual Corporate Tax return, summarises related party and connected person transactions above set values.
- **Local file:** deep entity-level analysis of in-scope controlled transactions.
- **Master file:** a group-level overview of the MNE, its business, intangibles, and financing.
- **Country-by-country report:** required for ultimate parent entities of large MNE groups.

For the related rules, see our explainers on [UAE Transfer Pricing Rules](https://einvoicedirect.ae/uae-corporate-tax/uae-transfer-pricing-rules), [UAE Transfer Pricing Documentation](https://einvoicedirect.ae/uae-corporate-tax/uae-transfer-pricing-documentation), [Transfer Pricing Master File UAE](https://einvoicedirect.ae/uae-corporate-tax/transfer-pricing-master-file-uae), and [CbCR UAE](https://einvoicedirect.ae/uae-corporate-tax/cbcr-uae).

## How to prepare a transfer pricing local file step by step

A clean local file follows a repeatable process. Use this checklist each year.

- **Confirm scope.** Check if entity revenue or group consolidated revenue meets the threshold. If yes, identify in-scope counterparties.
- **Map transactions.** List every category of controlled transaction with in-scope counterparties: goods, services, royalties, financing, cost sharing, guarantees.
- **Assemble agreements.** Collect all intercompany contracts and addenda. Flag any missing or unsigned documents.
- **Run the functional analysis.** Document the functions performed, assets used, and risks assumed (FAR) by the UAE entity and each counterparty.
- **Select the method.** Choose from the five OECD methods, comparable uncontrolled price, resale price, cost plus, transactional net margin, or profit split. Document why it is the most appropriate.
- **Benchmark.** Run a fresh comparables search or refresh prior year financial data. Apply comparability adjustments and compute an arm's length range.
- **Test the actual results.** Compare tested party financials to the range. Document any year-end adjustments.
- **Draft the file.** Pull all sections together in OECD order with UAE specifics.
- **Review and sign off.** Tax, finance, and legal review. Lock the file by the Corporate Tax return filing date.
- **Store and refresh.** Keep the file for at least 7 years. Update it annually.

### Worked example: distributor of consumer goods

A UAE entity buys finished goods from a parent in Europe and resells in the GCC. Annual revenue is AED 260 million, so the entity threshold is met. The local file would include:

- A description of the UAE distributor, its sales team, warehouse, and marketing functions.
- The intercompany supply agreement with the European parent.
- A FAR analysis showing the UAE entity is a limited risk distributor.
- Selection of the transactional net margin method (TNMM) with the UAE distributor as the tested party.
- A benchmarking study of independent distributors with an arm's length operating margin range, for example 2.5% to 4.5%.
- Tested party operating margin of 3.2%, inside the range. Conclusion: arm's length.

## Penalties and risks of weak documentation

If the FTA requests the local file and it is missing, incomplete, or incorrect, administrative penalties apply under Cabinet Decision 75 of 2023 on Corporate Tax penalties. The FTA can also adjust your taxable income if controlled transactions do not meet the arm's length standard, which can pull income from a 0% QFZP bucket into the 9% bucket, or trigger double taxation when foreign tax authorities take a different view.

### Common audit pain points

- Missing or unsigned intercompany agreements.
- Functional analysis that does not match what people actually do in the UAE.
- Benchmarks that use stale data or non-UAE comparables without justification.
- Disclosure form values that do not reconcile to the local file or the trial balance.
- Year-end true-up entries with no supporting policy.
- Confusion between QFZP qualifying income and the 9% rate, leading to mis-scoped transactions.

## Practical tips for finance teams

- **Start with the disclosure form.** Build the list of related party and connected person transactions in your enterprise resource planning (ERP) system, then map it to the local file.
- **Use one transfer pricing policy.** A short written policy on each transaction category keeps year-end work fast.
- **Refresh benchmarks every 3 years.** Update financial data annually within that cycle, unless the business model changes.
- **Reconcile to financial statements.** Tie every figure in the local file to audited accounts. The FTA will check this.
- **Coordinate with the group.** The UAE local file must be consistent with the group master file and CbCR.
- **Keep records for 7 years.** Article 56 of Federal Decree-Law 47 of 2022 sets the retention period.

For official guidance, see the [UAE Ministry of Finance](https://mof.gov.ae) and the [Federal Tax Authority](https://tax.gov.ae) websites, where Corporate Tax legislation, Cabinet Decisions, and the Transfer Pricing Guide are published.

## Local file timeline inside the Corporate Tax cycle

| Stage | Action | Timing |
| --- | --- | --- |
| Q1 of tax period | Confirm intercompany policies, sign agreements | Start of year |
| During the year | Track related party transactions in the ERP | Ongoing |
| Year end | Book year-end adjustments if needed | Within 30 days of close |
| Months 1 to 6 after year end | Run benchmarking, draft local file | Within 6 months |
| Months 7 to 9 after year end | Review, sign off, file return with disclosure form | By month 9 |
| On FTA request | Submit local file and master file | Within 30 days |

This timeline aligns with the Corporate Tax return deadline, which falls within 9 months of the financial year end. If your year end is 31 December, your return and supporting transfer pricing documentation are due by 30 September of the following year.

## How EInvoice Direct supports your transfer pricing data

Solid transfer pricing documentation starts with clean transaction data. UAE e-invoicing under the Peppol 5-corner Decentralized Continuous Transaction Control and Exchange (DCTCE) model in the PINT AE format will give finance teams structured invoice data for every business-to-business (B2B) and business-to-government (B2G) transaction, including intercompany flows. That data feeds directly into your [UAE Corporate Tax](https://einvoicedirect.ae/uae-corporate-tax) disclosure form and local file reconciliation.

To see how EInvoice Direct can simplify your data trail for related party reporting, [get UAE e-invoicing pricing](https://einvoicedirect.ae/for-businesses#contact) and a tailored fit for your finance stack.

## Frequently asked questions

### Who needs to prepare a transfer pricing local file in the UAE?

A UAE taxable person must prepare a local file if entity revenue is AED 200 million or more in the tax period, or if it belongs to a multinational group with consolidated revenue of AED 3.15 billion or more. These thresholds come from Ministerial Decision 97 of 2023 under Federal Decree-Law 47 of 2022. Below the thresholds, arm's length compliance still applies, but no formal local file is required.

### What transactions must be included in the UAE local file?

Include transactions with non-residents, exempt persons, residents that elected Small Business Relief, and residents taxed at a different Corporate Tax rate, such as a Qualifying Free Zone Person on qualifying income. Transactions with ordinary UAE resident related parties taxed at the same 9% rate are generally outside local file scope, although they still require arm's length pricing and supporting records.

### When must the transfer pricing local file be submitted to the FTA?

The local file is not filed with the Corporate Tax return. The taxpayer must prepare it by the return filing date, within 9 months of the financial year end. The Federal Tax Authority can then request it in writing at any time, and the taxpayer must submit it within 30 days of the request, along with the master file where applicable.

### What is the difference between the local file and the master file?

The local file documents the UAE entity, its controlled transactions, and the arm's length analysis at entity level. The master file provides a high level picture of the entire multinational group, including its global business, intangibles, intercompany financing, and consolidated financials. Both follow OECD Chapter V and the same thresholds apply, so taxpayers that need one usually need the other.

### What language and format should the UAE local file use?

The local file is typically prepared in English, in line with OECD Transfer Pricing Guidelines, Chapter V, Annex II. The Federal Tax Authority may request an Arabic translation of all or part of the file. Keep a clear table of contents, label each section, and reference financial statements so the reviewer can trace every figure back to the source records.

### How long must transfer pricing records be kept in the UAE?

Article 56 of Federal Decree-Law 47 of 2022 requires Corporate Tax records to be kept for at least 7 years after the end of the tax period. This applies to the local file, master file, intercompany agreements, benchmarking studies, and supporting financial data. Keep electronic and signed paper copies of agreements, and store benchmarking database extracts in case the FTA asks for them later.

### What are the penalties for a missing or incomplete local file?

Administrative penalties under Cabinet Decision 75 of 2023 apply for failing to keep required Corporate Tax records, including transfer pricing documentation. The Federal Tax Authority can also adjust taxable income where controlled transactions are not at arm's length, which may increase tax payable, reduce free zone benefits, or trigger double taxation. Voluntary disclosure can reduce penalty exposure if errors are found internally.


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