Transfer pricing refers to the pricing of transactions carried out between related parties within the same corporate group, including dealings involving goods, services, intellectual property, loans, assets, or other commercial arrangements. Because these parties are not independent, their transactions may not be influenced by normal market forces, which creates a risk that prices could be set in a way that does not reflect true market conditions.

This, in turn, may impact how profits are allocated across different jurisdictions. To address this risk, transfer pricing regulations require that such transactions comply with the arm’s length principle, ensuring they are priced as if they were conducted between unrelated parties.

In the UAE, the Federal Tax Authority classifies a controlled transaction as any transaction or arrangement between related parties or connected persons under the Corporate Tax Law, including those conducted entirely within the UAE, such as between a mainland company and its free zone affiliate. The fact that a transaction is domestic does not exempt it from transfer pricing rules. We can assist with transfer pricing requirements, including those related to managerial remuneration and other related party transactions.