UK & UAE Transfer Pricing Rules: Key Guidelines, and Global Considerations for Companies Growing Internationally

As global business expands, tax authorities are paying closer attention to how companies set prices for transactions between related parties. The UK has long-standing transfer pricing rules, while the UAE has only recently introduced its own UAE transfer pricing rules under the Corporate Tax Law – making this an emerging area that businesses operating in or with the UAE should closely monitor.

In this article, we’ll explain what transfer pricing means, outline the main requirements under both the UK regime and the UAE transfer pricing rules, and show how WellTax can help businesses stay compliant while keeping things simple and practical.

What Is Transfer Pricing and Why Does It Matter in the UAE?

Transfer pricing involves setting prices for transactions like goods, services, financing, or intangible assets when these occur between related parties, such as subsidiaries of the same group. Since these parties are not entirely independent, there is a risk that prices might be manipulated to shift profits to countries with lower tax rates.

To address this risk, the UAE transfer pricing rules require that transactions between related entities comply with the Arm’s Length Principle (ALP). This means pricing should reflect what unrelated parties would agree upon under similar circumstances. This principle aligns with global tax standards, particularly those set by the OECD.

For example, if a UAE parent company sells products or provides services to its foreign subsidiary or vice-versa, the pricing must match what it would charge an unrelated third party. This helps ensure a fair allocation of taxable profits across jurisdictions and prevents tax avoidance.

Who Needs to Comply with UAE Transfer Pricing Rules?

The UAE transfer pricing rules apply to both multinational and domestic companies. A common misconception is that only global businesses are affected. In fact, any UAE-based company that engages in transactions with related or connected parties may be subject to the rules.

These include relationships such as:

• Ownership (e.g., parent-subsidiary)
• Control (e.g., same management or board members)
• Kinship (for natural persons)
• Certain partnerships and permanent establishments

Under the UAE transfer pricing rules, companies that exceed specific revenue or transactional thresholds set by the Ministry of Finance are required to meet transfer pricing documentation requirements. This includes preparing a Master File and Local File to ensure transparency in related-party transactions, detailing the group’s business operations, pricing policies, and comparability analyses.

WellTax works with clients to assess if they meet the necessary thresholds and, when required, supports them in preparing transfer pricing documentation in line with international best practices.

Understanding the Arm’s Length Principle in Practice

The Arm’s Length Principle is the cornerstone of the UAE transfer pricing rules. But how does it work in practice?

Let’s say a UAE-based consulting firm provides project management services to its affiliated company based in another country. To comply with the arm’s length principle (ALP), the consulting fees charged must reflect what the UAE firm would have charged an unrelated client for similar services under comparable terms. If the affiliated company is charged significantly lower fees without valid commercial reasons, such as volume discounts or long-term agreements, the Federal Tax Authority (FTA) may intervene, reassess the arrangement, and adjust the UAE company’s taxable income to reflect fair market value.

In such cases, WellTax conducts a comparability analysis, benchmarks the transaction using reliable databases, and advises clients on pricing adjustments, ensuring the terms pass regulatory scrutiny and comply with ALP rules.

Transfer Pricing Methods Recognised in the UAE

The UAE transfer pricing rules are largely modelled after OECD standards. The following methods are recognized when determining whether a transaction is conducted at arm’s length:

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

Taxpayers are encouraged to use the most appropriate method based on the nature of the transaction and the availability of comparable data. WellTax assists in selecting and applying these methods with clear justifications documented in the transfer pricing files.

Documentation Requirements Under UAE Transfer Pricing Rules

Apart from applying the correct method, companies must also maintain proper documentation to support their transfer pricing policies. Under the UAE transfer pricing rules, companies may need to submit:

• Disclosure Forms in the corporate tax return if the threshold is met, identifying controlled transactions
• Master File, detailing the overall group structure and global transfer pricing policies
• Local File, focusing on the UAE entity’s intercompany transactions and benchmarking analysis

These requirements are not one-size-fits-all. Businesses below certain thresholds are exempt from maintaining the Master and Local Files, although they still need to ensure transactions are at arm’s length. WellTax helps clients determine their obligations and prepares tailored documentation as needed, aligned with both local and OECD standards.

Transfer Pricing and UAE Double Tax Treaties

The UAE’s extensive network of double taxation agreements (DTAs) plays a critical role in minimizing the risk of cross-border tax disputes. When transfer pricing adjustments are made in one country, it can lead to the same income being taxed twice, in both the origin and recipient jurisdictions. Understanding both the UK and UAE transfer pricing rules is essential to correctly apply adjustments and prevent unintended double taxation.

To mitigate this, the Mutual Agreement Procedure (MAP) allows tax authorities in treaty-partner countries to resolve disputes and relieve double taxation. WellTax advises clients on the availability and use of MAP in specific treaty situations, helping them achieve certainty in cross-border dealings.

To understand how specific treaty provisions between the UAE and UK impact tax planning and transfer pricing strategies, and to see how these interact with the UK and UAE transfer pricing rules, you can read our detailed article on the UK–UAE Double Tax Treaty. This resource provides deeper insights into how these treaties help businesses navigate cross-border tax challenges effectively.

UK Transfer Pricing Perspective

The UK’s transfer‑pricing rules are contained in Part 4 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) and are explicitly grounded in the OECD Guidelines. The legislation is principles‑based rather than formulaic and operates under a self‑assessment regime, like how UAE transfer pricing rules require compliance with arm’s length principles for related party transactions. Taxpayers must ensure their related‑party transactions are at arm’s length and make upward adjustments where needed; downward (corresponding) adjustments are generally not allowed, hence HMRC describes it as a “one‑way street”. There is a tick‑box on the corporation‑tax return to confirm whether the SME exemption applies and another to claim a corresponding adjustment in limited cases. Failure to take reasonable care or to maintain adequate TP documentation can result in penalties.

SME exemption: current law and consultation proposals

Under current law, the UK exempts small and medium‑sized enterprises from the need to apply the transfer‑pricing rules (subject to anti‑avoidance exceptions). A medium‑sized enterprise is defined by reference to the consolidated group: fewer than 250 employees and either turnover below €50 m or a balance‑sheet total below €43 m. A small enterprise has fewer than 50 employees and turnover/balance sheet totals below €10 m (the micro‑enterprise thresholds are even lower). HMRC may issue TP notices to small enterprises only where Patent‑Box profits are affected.

HMRC’s 2025 consultation proposes removing the exemption for medium‑sized enterprises, arguing that these businesses have the capability to apply TP rules and that the exemption allows a gap for profit diversion. The proposal would retain the exemption only for “small” enterprises but would rebadge the thresholds in sterling: <50 employees and either turnover or balance‑sheet total below £10 m. These thresholds would continue to be applied on a group‑consolidated basis. Businesses that exceed the small‑enterprise definition in two consecutive years would be required to apply TP rules to all cross‑border related‑party transactions. The consultation also proposes repealing most UK‑to‑UK transfer‑pricing requirements and introducing an International Controlled Transactions Schedule (ICTS) for groups with cross‑border related‑party transactions above £1 m, aligning UK practice with peers.

Transfer pricing methods

The most relevant pricing method should be chosen on a transaction-by-transaction basis, providing the most reliable measure of an arm’s length result in each case. The current OECD methods, as mentioned above, for instance, the comparable uncontrolled price, resale price, cost-plus, transactional net margin, and profit split methods, are all accepted; however, the technique used must align with the entity’s functional and risk profile. Other methods can also be used if justifiable and reasonable.

There is no set ranking, as the UK legislation currently refers to the 2022 OECD Guidelines. In practice, however, a “natural order” may be said to favour the comparable uncontrolled price method.

Documentation and risk management

HMRC recognises four tiers of TP documentation requirements. Currently, SME groups (small and medium) are not obliged to prepare formal documentation, although HMRC can request information and encourages intra‑group agreements and policy documents. Larger groups that do not exceed the €750 m CbCR threshold are expected to maintain Local Files with functional and economic analyses, while the largest groups (>€750 m of consolidated revenue) must prepare a Master File, Local File and Country‑by‑Country report. Documentation should be prepared in advance of filing the corporation‑tax return and be available in English. HMRC’s 2024 Guidance for Compliance (GfC7) emphasises risk identification, suggests evidence taxpayers should maintain and reiterates that inadequate documentation may be treated as carelessness.

Practical observations

1. Arm’s length standard – The UK follows the OECD methods without a formal hierarchy; however, HMRC tends to favour the comparable uncontrolled price method where reliable data exist.
2. Self‑assessment – Companies must make arm’s‑length adjustments in their computations; HMRC expects contemporaneous records and will view the absence of documentation unfavourably.
3. Anticipated tightening – If the consultation proposals are enacted, medium‑sized enterprises (50–250 employees, €10–€50 m turnover) would lose the exemption, meaning more UK‑based groups will need to document and benchmark their related‑party pricing. The small‑enterprise exemption would still apply but with £10 m thresholds, so even relatively small groups may need to comply.
4. Reporting cross‑border dealings – The proposed International Controlled Transactions Schedule (ICTS) would require annual reporting of cross‑border related‑party transactions exceeding £1 m, including high‑level data on income, expenditure and loans, and binary risk flags. UK‑to‑UK transactions would generally fall outside the schedule.
5. Broader interaction – For groups with UAE operations, careful planning is needed to manage Controlled Foreign Company rules and ensure that profits are not inadvertently taxed twice. It’s important to stay aligned with both UK and UAE transfer pricing rules, which require proper documentation and arm’s length pricing for both local and cross-border related-party transactions. For more on UK rules and anti-tax avoidance measures that complement transfer pricing, see our blog on UK Anti-Tax Avoidance Rules and OECD Alignment. Coordinating these practices with the UK-UAE double tax treaty helps ensure taxing rights are properly allocated and reduces the risk of cross-border tax exposure.

In summary, the UK operates a mature and increasingly transparent transfer‑pricing regime with self‑assessment, documentation expectations and a pending removal of the medium‑enterprise exemption. Businesses operating between the UK and the UAE should prepare for tighter compliance by documenting arm’s‑length pricing and ensuring compliance with both UK and UAE transfer pricing rules, reviewing group thresholds and monitoring the UK consultation outcomes.

UAE Transfer Pricing Rules vs. the UK Approach: Key Practical Differences and Lessons

As businesses increasingly operate across borders, understanding how transfer pricing works in different jurisdictions has never been more important. The UAE is just beginning its journey in this area, while the UK has decades of experience refining its rules. Both countries follow OECD standards, but their approaches to compliance, documentation, and enforcement differ considerably.

For businesses operating in both jurisdictions, these differences are more than theoretical because they can have real implications for taxes, profits, and risk management. The UK’s regime is highly developed and closely monitored by HMRC, with clear expectations around pricing of services, intellectual property, and financing arrangements. By contrast, the UAE Transfer Pricing Rules are still evolving. While enforcement may not yet be strict, this should not be mistaken for leniency as the UK’s experience provides a window into what may lie ahead.

Looking at the UK offers practical insights into what the UAE might adopt in the coming years. For example, the UK rarely accepts intra-group services charged “at cost,” applies detailed rules for intellectual property, and monitors financing transactions carefully. Exemptions exist for small and medium enterprises, but these do not currently exist under the UAE Transfer Pricing Rules.

The key takeaway for UAE businesses? Being proactive now is essential. Adopting robust transfer pricing practices today can help avoid compliance issues as the local regime matures.

To see these differences in practice, let’s look at some key transaction types.

Services between Related Parties – In the UK, HMRC rarely accepts charges made purely “at cost,” especially when profits shift to a lower-tax jurisdiction. Even routine support services usually carry a markup, commonly around 5%, while higher-value activities may justify a higher return. Independent businesses expect a profit, and related parties should act in the same way.

In the UAE, some companies still adopt a simple cost-sharing model, especially in the early years. While this may pass without challenge today, the UK experience shows it rarely holds up long-term. Documenting markups, benchmarking where possible, and treating intra-group services like third-party transactions is a forward-looking strategy that aligns with UAE Transfer Pricing Rules.

Intellectual Property and Intangibles – Valuing intellectual property (IP) is another area where the UK offers guidance. HMRC expects that if an IP asset creates commercial benefit, it should be appropriately priced and nil or royalty-free transfers are rarely accepted.

In the UAE, enforcement is still developing, but following a similar approach is prudent. Documenting IP value, justifying any payments or royalties, and clarifying who performs key functions helps ensure compliance with UAE Transfer Pricing Rules and builds a foundation for future scrutiny.

Funding and Financing Transactions – In the UK, equity contributions are generally outside transfer pricing, but intercompany loans must carry market-based interest rates to prevent profit shifting.

The same principle applies in the UAE. Any advances or loans between related parties should reflect arm’s length terms and be properly documented. This demonstrates commercial discipline and supports compliance with UAE Transfer Pricing Rules.

Treatment of Smaller Companies – The UK offers exemptions for many small and medium-sized enterprises, reducing transfer pricing compliance obligations. In contrast, the UAE Transfer Pricing Rules apply more broadly – once revenue or transaction thresholds are met, even smaller businesses must comply.

Size alone does not shield UAE companies from obligations. Clear pricing policies and documentation from the start are essential to mitigate future risks as enforcement develops.

Documentation and Enforcement – In the UK, contemporaneous records are expected even for exempted SMEs, and penalties exist for non-compliance. The UAE Transfer Pricing Rules are still new, but preparing agreements, benchmarking reports, and supporting documentation now sets a strong foundation for future compliance. Proper documentation demonstrates that pricing is arm’s length and helps businesses stay ahead as the UAE regime matures.

The UK-UAE Double Tax Treaty further determines how income is allocated between the two countries, particularly regarding business profits attributable to permanent establishments and other cross-border activities. Coordinated transfer pricing strategies can help prevent unnecessary tax exposure in either jurisdiction.

WellTax supports clients with UK-UAE operations by reviewing their structures and advising on treaty benefits and potential risks under both the UAE Transfer Pricing Rules and UK legislation. This resource provides detailed insights to help businesses navigate compliance and optimize their tax positions.

The key takeaway: UAE businesses can learn from the UK’s experience – by putting proactive documentation, arm’s length pricing, and clear policies in place now, they can stay ahead of evolving UAE Transfer Pricing rules and safeguard against future risks.

Common Mistakes and How to Avoid Them

Many businesses fall short of compliance due to misunderstanding their obligations under either the UK or UAE transfer pricing rules. Despite differences in maturity and enforcement approaches, the two regimes share several common pitfalls:

• Assuming documentation is only required for large multinationals – In both the UAE and UK, smaller businesses often assume they are exempt. While SMEs may benefit from exemptions in the UK (subject to group size thresholds), they are still expected to demonstrate that their pricing is arm’s length. In the UAE, groups exceeding AED 3.15 billion / EURO 750 million are formally required to maintain a Master File and Local File, but businesses of all sizes must complete the disclosure form and maintain adequate documentation.
• Using group-wide pricing without local benchmarking – Applying global pricing templates without considering local market conditions can lead to pricing mismatches. Both the FTA and HMRC expect local benchmarking and economic analysis in line with OECD standards.
• Ignoring low-value or non-monetary transactions – Back-office support, management services, and cost allocations are often overlooked. However, these can trigger tax exposure if not priced or documented properly, especially in the UK, where omission may be treated as “carelessness” and lead to penalties.
• Not disclosing connected-party transactions in the tax return – In both systems, disclosures are essential. UAE taxpayers must file the “Disclosure Form” and transfer pricing schedules. In the UK, companies must tick boxes on the CT600 return to confirm exemption eligibility or claim adjustments, with cross-border disclosures set to expand under the proposed International Controlled Transactions Schedule (ICTS) which is similar to the Transfer Pricing Disclosure Form (TPDF) in the UAE.

Avoiding these errors requires proactive planning and robust record-keeping. At WellTax, we help businesses implement scalable, defensible, and compliant transfer pricing frameworks that stand up to scrutiny, whether under UK and UAE transfer pricing rules or across borders.

Looking Ahead: Transfer Pricing as a Strategic Priority

As both jurisdictions tighten their tax environments, businesses must actively manage risks under UK and UAE transfer pricing rules, making transfer pricing a strategic, rather than purely compliance, exercise.

• In the UAE, the Federal Tax Authority (FTA) is expected to deploy increasingly sophisticated tools for audit selection, relying on analytics to identify pricing anomalies. Compliance failures may lead to substantial penalties, especially as enforcement becomes more targeted.
• In the UK, HMRC is similarly moving toward a transparency-driven regime. Its 2025 consultation proposes:
  • Removing the SME exemption for medium-sized businesses (250 employees / €50 m turnover),
  • Introducing mandatory reporting of cross-border related-party transactions above £1 million (ICTS),
  • Repealing most UK-to-UK transfer pricing requirements.

This means more groups, especially those operating in both countries, will need to actively document their intercompany dealings, justify transfer pricing methodologies, and align local files with OECD best practices.

At WellTax, we support clients in navigating these developments across both jurisdictions. We help ensure alignment between UAE and UK rules, avoiding double taxation risks and preparing groups for evolving disclosure requirements.

How to Stay Compliant with UAE and UK Transfer Pricing Rules

Compliance on both UK and UAE transfer pricing rules is no longer optional. Both jurisdictions now require companies to adopt structured, transparent approaches to pricing and documentation.

To stay compliant:

• Understand your group structure and thresholds. If your UAE group exceeds AED 3.15 billion turnover or your UK group breaches the SME thresholds (and loses exemption status), you may need to prepare full documentation, including Master File, Local File, and benchmarking reports.
• Select appropriate pricing methods. The OECD’s five standard methods are accepted in both jurisdictions. However, the UK tends to favour the Comparable Uncontrolled Price (CUP) method when reliable data is available, while the UAE allows flexibility, provided the method aligns with economic substance and risk.
• Maintain contemporaneous documentation. UAE and UK tax authorities expect that documentation is prepared before filing tax returns. In the UK, failure to do so may be treated as negligence; in the UAE, missing disclosures can result in automatic penalties.
• Plan for cross-border alignment. Groups operating between the UK and UAE should assess the interaction between UK and the UK-UAE double tax treaty, ensuring that all intercompany dealings comply with UK and UAE transfer pricing rules and that profit allocations are justified under both regimes.
• Monitor regulatory changes. The UK’s proposed reforms (ICTS, SME exemption repeal) could come into force as early as 2026. Groups should begin preparing now to identify affected entities and transactions.

Staying ahead of transfer pricing requirements in both the UK and UAE allows businesses to operate confidently. With guidance from WellTax, navigating UK and UAE transfer pricing rules becomes manageable, enabling companies to focus on growth while maintaining full compliance.