Yes. Transfer pricing rules apply to UAE businesses that have transactions with Related Parties and Connected Persons, irrespective of whether the Related Parties or Connected Persons are located in the UAE mainland, a Free Zone or in a foreign jurisdiction.

Businesses benefiting from Small Business Relief will not be required to file transfer pricing documentation. This includes both the requirement to file a transfer pricing information disclosure form together with a Tax Return and the requirement to maintain a master file and a local file. However, businesses must still comply with transfer pricing rules and transactions with Related Parties must meet the arm’s length principle.

The conditions of the Free Zone Corporate Tax Regime require a Qualifying Free Zone Person to:
• Maintain adequate substance in a Free Zone.
• Derive Qualifying Income.
• Not have made an election to be subject to the regular UAE Corporate Tax regime
• Comply with arm’s length principle and transfer pricing rules and documentation requirements
• Prepare and maintain audited financial statements

A Qualifying Free Zone Person must prepare and maintain adequate documentation to support the arm’s length pricing of transactions with related parties, in accordance with the Corporate Tax Law. A Qualifying Free Zone Person that meets the conditions prescribed by the Ministerial Decision No. 97 of 2023 Requirements for Maintaining Transfer Pricing will also need to prepare and maintain a transfer pricing master file and local file.

Remuneration paid to the management of a business will generally be a deductible expense for Corporate Tax purposes.
There are a few specific cases that may impact on the amount of remuneration that can be deducted.
These are:
• Where the remuneration is paid to a director or owner of the business or to someone who is related to the director or the owner and considered a Connected Person, the remuneration should reflect the market rate for the relevant role and services performed. Any amount paid that is above the market rate would not be deductible.
• Where a company pays a management fee to its parent or any other Related Party, transfer pricing rules will need to be considered to ensure that the fee is at arm’s length. Any amount paid that is above the arm’s length price would not be deductible.

Businesses will be required to maintain information regarding their transactions with Related Parties and Connected Persons, and certain businesses will be required to submit this information along with their Tax Return. Businesses that claim Small Business Relief will not have to comply with the transfer pricing documentation rules.
Certain businesses may be requested to maintain a master file and a local file.

A Taxable Person will need to maintain a master file and a local file if either:
• Their Revenue in the relevant Tax Period is AED 200 million or more; or
• They are part of a Multinational Enterprise Group as defined in Cabinet Decision No. 44 of 2020 (which cover groups that operate in more than one country and have total consolidated group revenue of AED 3.15 billion or more in each financial period).

Exempt Persons will not be required to maintain transfer pricing documentation so long as they maintain their exemption status.
Also, businesses benefitting from the Small Business Relief will not be required to maintain transfer pricing documentation.