UAE TP

As businesses progress through the second UAE Corporate Tax compliance cycle, it's not too late to take stock of the areas that still require attention in fact, this is often when the most valuable lessons surface, ahead of the next cycle. Below, we outline the key areas businesses should prioritize to strengthen their Transfer Pricing position going forward.

1. From compliance to consistency

• FY2025 will test whether businesses can sustain robust TP practices year-on-year, not just complete a one-time exercise.
• Businesses should ensure that benchmarking analyses remain current, with financial data and the underlying economic analysis reviewed and updated as appropriate

2. Sharper scrutiny on documentation quality

• Authorities and auditors alike will expect more than boilerplate Local Files with genuine functional and risk analysis tailored to the business.
• Informal intercompany arrangements from FY2024 will need to be formalised with proper agreements and contemporaneous support.

3. Greater clarity on related party vs. connected person distinctions

• Businesses are expected to apply threshold assessments correctly and independently, avoiding any confusion.

4. Earlier, more structured engagement

• With the learning curve behind them, businesses are expected to engage TP advisors well ahead of the Corporate Tax deadline and not in the final weeks.

5. Higher expectations around benchmarking

• Comparable selection, rejection rationale, and search methodology will face closer examination, especially where regional data is limited and broader geographic searches are relied upon.

6. A shift toward proactive risk management

• Rather than reactive documentation, FY2025 calls for TP policies embedded into business operations from the outset with pricing decisions made with ALP in mind, not retrofitted at year-end.

What Should Businesses Do Now?

As a next step, taxpayers should consider:

• Plan ahead – Start the Transfer Pricing process well before the Corporate Tax filing deadline.
• Stay current – Review documentation, financial information and economic analyses regularly.
• Formalise arrangements – Ensure material intercompany arrangements are appropriately documented and consistent with the parties' actual conduct.
• Apply the rules correctly – Clearly identify Related Parties and Connected Persons and assess the applicable disclosure and documentation requirements.
• Be proactive – Consider Transfer Pricing when business and pricing decisions are made, rather than addressing it only at year-end.

Looking ahead

The next phase of UAE Transfer Pricing compliance is less about learning the rules and more about demonstrating that they have been applied consistently and supported appropriately.

Businesses that treat Transfer Pricing as an ongoing discipline rather than an annual compliance exercise will be better placed to maintain robust documentation, identify risks early and respond effectively as the UAE Corporate Tax framework continues to mature.