Advance Pricing Agreements: A UAE Practical Guide

What is an Advance Pricing Agreement?

An Advance Pricing Agreement (“APA”) is an agreement between the Federal Tax Authority (“FTA”) and a taxpayer, which sets the criteria to determine the arm’s length price in relation to transactions entered into or to be entered into by the taxpayer with its related parties (“Controlled Transactions”) in a particular tax period.

What are the different types of APAs?

While international standards recognize three types of APAs, the UAE is implementing them via a phased rollout:

• Unilateral APA: An agreement between the FTA and a taxpayer.

• Status: This is the current priority for the FTA, with applications officially accepted as of late 2025/early 2026.

• Bilateral APA: An agreement between the FTA and a foreign tax authority.

• Multilateral APA: An agreement between the FTA and multiple foreign tax authorities.

Note: Bilateral and Multilateral APAs will be introduced in a later phase once the framework for international treaty coordination is fully operational.

What are the benefits of an APA?

The following are the key benefits of an APA:

• Tax Certainty: Enhances predictability regarding the tax treatment of Controlled Transactions.
• Relationship Building: Provides an opportunity to engage with the FTA in a cooperative environment.
• Risk Mitigation: Reduces the need for time-consuming examinations of complex Transfer Pricing (“TP”) issues and mitigates the risk of tax litigations.
• Double Taxation Relief: Reduces or effectively eliminates double taxation through bilateral APAs.
• Compliance Streamlining: Simplifies record-keeping by clearly outlining the required documentation to ensure compliance with the APA.

Who is eligible for an APA?

Any taxpayer who has proposed or entered into domestic and/or cross-border Controlled Transactions is eligible to enter into an APA, provided they meet the materiality threshold.

The Materiality Threshold: The threshold is met when the annual aggregate value of all Controlled Transactions proposed to be covered under the APA is at least AED 100 million for the relevant tax period.

Application to Different Entities:

• Juridical Persons: Most corporate entities will focus on the AED 100 million annual threshold for their intercompany dealings.
• Natural Persons: Individuals (freelancers or sole proprietors) are eligible if they are considered "Taxable Persons"—meaning their business turnover in the UAE exceeds the AED 1 million annual threshold.
• Government & Exempt Entities: While certain government and exempt entities have different corporate tax profiles, they may still seek an APA if they engage in business activities through taxable branches or subsidiaries that meet the materiality criteria.

Note: Meeting the AED 100 million threshold is a primary indicator of eligibility, but the FTA retains full discretion. They will evaluate each request based on the complexity of the transactions, the clarity of the proposed transfer pricing methodology, and the potential to reduce future tax controversy. An application may be accepted even if it falls slightly below the threshold if the transaction is exceptionally complex or high-risk.

What are the stages of an APA?

The following are the typical stages of an APA:

• Stage 1 – Mandatory pre-filing consultation:  A taxpayer wishing to enter into an APA must make a request to the FTA for a pre-filing consultation to determine eligibility for and scope of an APA.
• Stage 2 – Filing of an APA application: A taxpayer may proceed to submit an APA application upon receiving the notification to proceed with APA filing. The FTA may accept or reject the APA application if the application does not meet the prescribed requirements.
• Stage 3 – Evaluation and negotiation of the APA: Once the application has been accepted and the FTA has finalised preliminary procedures including collection of all required information and documents, the FTA will commence its evaluation and analysis of the APA.
• Stage 4 – Concluding an APA and implementation: Once the FTA concludes its evaluation and analysis and is satisfied that taxpayer has complied with all the terms and conditions of the APA, The FTA shall discuss the implementation of the APA with the taxpayer and both parties shall sign the APA based on terms and conditions mutually agreed. It will typically cover a period of 3 to 5 years.
• Stage 5 – Monitoring and review: A taxpayer who has entered into an APA with the FTA is required to file an APA Annual Declaration for each tax period covered under the APA. Following a review of the APA Annual Declaration by the FTA, no changes may be required to the APA, or it may result in a revision or revocation of the APA.

What are the fees applicable to an APA?

The following are the applicable fees:

• AED 30,000 application fee
• AED 15,000 renewal fee.

Note: The above fees are non-refundable and to qualify for the reduced renewal fee, applications must be submitted at least 3 months prior to the APA's expiry.

Conclusion

The introduction of the APA programme marks a significant step in strengthening the UAE’s TP framework and aligning it with global best practices. Businesses with material Controlled Transactions should evaluate the need of entering into an APA with the FTA. Early engagement with the FTA will be