The principle
Under corporate tax, transactions with related parties — companies in your group, or owners and their relatives — must be priced as if the parties were independent. Payments to connected persons such as owners and directors must reflect the market value of the service they provide.
What SMEs usually have
- Management fees or recharges between group companies
- Loans from shareholders or between companies
- Salaries or consultancy fees paid to owners
- Goods sold between related companies at non-market prices
Disclosure and documentation
Many businesses must file a transfer pricing disclosure form with the corporate tax return, listing related-party and connected-person transactions above set thresholds. A full Local File and Master File are needed only by larger businesses — for example those with revenue of AED 200 million or more, or part of a group with consolidated revenue of AED 3.15 billion or more.
What to do now
- List every related-party flow for the year
- Put intercompany agreements in writing
- Check owner pay against the market
- Keep evidence of how prices were set
