DHRUVA URGES UAE BUSINESSES TO ACT NOW ON TRANSFER PRICING RISK

Dhruva, a premier tax advisory firm with deep expertise across the Middle East, India, and Asia, is encouraging UAE-headquartered groups and multinational companies operating in the country to place transfer pricing (TP) firmly on their strategic and governance agenda, as the UAE’s corporate tax landscape develops and aligns more closely with international practice.

With corporate tax now in effect, the way organisations price transactions between related parties and connected persons is becoming an important element of tax governance, financial planning and stakeholder confidence. TP is no longer just a specialist topic for tax teams, but an area that benefits from early, well-considered attention at senior management level.

“Transfer pricing has quickly become one of the key components of a modern tax framework in the UAE,” said Kapil Bhatnagar, Partner, Dhruva. “For many organisations, this is still a relatively new area. Our message is a positive one, now is a good time to step back, understand your intra-group arrangements and put in place a clear, well-documented approach. Doing this early can bring greater clarity, predictability and comfort for management, shareholders and other stakeholders.”

Dhruva notes that TP considerations are relevant not only for large global multinationals, but also for UAE-headquartered groups, family businesses, free zone entities and fast-growing regional companies. Any business with cross-border or domestic related-party dealings – such as management fees, services, financing, distribution, manufacturing, or use of intellectual property – can benefit from having a structured view on how these transactions are priced and supported.

Kapil added, “A common question we receive from clients is simply, ‘Where do we start?’ In our experience, the most effective approach is to treat transfer pricing as a practical business project rather than just a technical exercise. It starts with understanding how your group creates value, how responsibilities and risks are shared, and then reflecting that in your pricing, internal policies, and documentation in a consistent way.”

Next steps for UAE organisations

Dhruva’s suggested next steps for UAE organisations focus on helping boards, CEOs, CFOs, and tax leaders move from awareness to practical action on transfer pricing. The first step is to map related-party transactions and understand the big picture. Organisations should identify their main related-party and connected-person transactions, both within the UAE and cross-border, and then group them by type – for example, services, goods, financing, intellectual property or guarantees. From there, they can build a simple, high-level overview of how value flows within the group and where key functions and decision-making actually sit.

The second step is to develop or refine a coherent transfer pricing framework. This involves designing a framework that clearly sets out how different categories of transactions are priced, using appropriate methodologies that reflect the business reality. Internal policies, legal agreements, operational substance and financial outcomes should all be aligned so that they tell a consistent story. It is also important to integrate transfer pricing considerations into budgeting and planning cycles, rather than addressing them only at year-end.

The third step is to strengthen documentation and internal capabilities. Organisations should prepare documentation that explains the group’s business model, value chain and the rationale for its pricing approach in a clear and structured manner. Finance and tax teams need to be equipped with the knowledge and tools to maintain and update this information over time as the business evolves. In addition, a simple governance mechanism should be established to ensure that transfer pricing topics are periodically reviewed at management level and, where relevant, at board level as part of ongoing oversight.

“In many ways, the UAE is at a constructive stage in its tax journey,” Kapil said. “Businesses have the opportunity to put robust, practical transfer pricing foundations in place that reflect how they actually operate. This is not only about compliance – it is about having clarity, supporting informed decision-making and giving confidence to investors, partners and employees.”

Dhruva’s analysis of developments across the wider GCC shows that other regional markets are also expanding their focus on transfer pricing, documentation, and alignment with international standards. For groups operating in more than one jurisdiction, a coordinated regional approach can support consistency and reduce uncertainty.

“Our recommendation to UAE organisations is to use this period to get ready in a thoughtful, structured way. Early movers often find that a well-designed transfer pricing approach supports smoother internal decision-making and provides comfort as the tax environment continues to mature,” concluded Kapil.