Transfer pricing is a hidden minefield for businesses operating between the UK and the UAE. While intercompany transactions are a normal part of cross-border operations, poorly structured or undocumented arrangements can trigger penalties, profit adjustments, and tax audits in both jurisdictions.
With UAE Corporate Tax now firmly in force and HMRC’s continued focus on base erosion and profit shifting, UK-UAE transfer pricing compliance is no longer optional. Businesses that get it wrong face increasing financial, regulatory, and reputational risk.
This guide explains what triggers transfer pricing rules, the key UAE thresholds, how HMRC scrutinises UK-UAE structures, and how robust transfer pricing can be used not just for compliance, but as a tool for efficient profit flow.
Transfer pricing rules apply whenever transactions occur between related parties, meaning entities under common ownership or control. In UK-UAE group structures, the following transactions are most frequently reviewed by tax authorities.
Management fees are charged for services such as:
Strategy and executive oversight
Finance and accounting
HR, IT, and operational support
Tax authorities assess whether:
The services were actually provided
The recipient received a real commercial benefit
The fees reflect arm’s length (market) pricing
Unsupported or inflated management fees are often viewed as profit-shifting mechanisms, rather than legitimate commercial charges.
IP royalties include payments for:
Trademarks
Software and technology
Patents and proprietary systems
Authorities examine:
Who owns and controls the IP
Where the IP was developed
Whether royalty rates align with independent market comparables
High-risk area: IP royalties are closely scrutinised by both HMRC and the UAE tax authorities, especially where substance does not match profit allocation.
Intercompany loans present a major compliance risk when:
No formal loan agreement exists
Interest rates are not market-based
Repayment terms are unclear or ignored
⚠️ In the UAE, undocumented or mispriced loans can trigger deemed interest taxation, even where no interest is charged contractually.
UAE transfer pricing compliance is threshold-based, and misunderstanding these limits is a common and costly mistake.
→ Transfer Pricing Disclosure Form required with the UAE corporate tax return
→ Master File and Local File documentation required, aligned with OECD standards
❗ Failure to comply may result in:
Financial penalties
Increased audit scrutiny
Adverse tax adjustments
At the centre of UK-UAE transfer pricing compliance is the Arm’s Length Principle.
This requires related-party transactions to be priced as if they were conducted between independent parties under comparable conditions.
Properly drafted intercompany agreements
Benchmarking and pricing studies
Clear allocation of:
Functions
Risks
Assets
Key rule: Authorities rely on evidence, not intent.
Even commercially reasonable pricing can be challenged if it is not documented.
Both the UK and UAE align with the OECD Transfer Pricing Guidelines, which define:
Accepted pricing methods
Documentation standards
Audit and dispute frameworks
OECD alignment is essential for defending positions in dual-jurisdiction audits.
HMRC actively reviews UK-UAE structures to prevent base erosion and profit shifting. Key risk areas include:
Excessive payments to UAE entities
Royalty or service arrangements lacking substance
Financing structures that erode UK taxable profits
HMRC has the authority to recharacterise transactions, impose penalties, and deny deductions if pricing is not defensible.
Without aligned documentation and consistent pricing policies, businesses risk double taxation—being taxed on the same income in both the UK and the UAE.
Robust, OECD-aligned documentation and commercially sound agreements are essential to:
Supporting treaty positions
Reducing adjustment mismatches
Minimising double taxation exposure
Risk: Deemed interest income and denied deductions
Solution: Formal loan agreements, market-based interest benchmarking, and clear repayment schedules
Risk: Royalty disallowance or pricing adjustments
Solution: IP valuation studies and reliable external comparables
Risk: Weak audit defence and penalties
Solution: Pre-emptive transfer pricing studies prepared before transactions occur
Businesses that manage transfer pricing risk effectively tend to adopt a proactive approach, including:
Conducting pre-emptive transfer pricing studies
Maintaining up-to-date documentation
Reviewing pricing policies regularly as operations evolve
Ensuring contracts reflect actual business conduct
This approach not only reduces audit risk but also improves internal governance and financial predictability.
Theta7.ae provides end-to-end transfer pricing support tailored specifically for businesses operating between the UK and the UAE.
Drafting and reviewing arm’s length intercompany agreements
Preparing Transfer Pricing Disclosure Forms in line with UAE corporate tax requirements
Developing OECD-aligned Master Files and Local Files
Conducting independent benchmarking and pricing studies
Supporting audit readiness and regulatory responses
Providing ongoing advisory support as UAE transfer pricing rules continue to evolve
Transfer pricing does not operate in isolation. Theta7.ae integrates transfer pricing into your wider:
UK-to-UAE relocation plans
Group restructuring initiatives
Operating model and profit allocation strategy
This ensures compliance without disrupting operations, while supporting sustainable growth and long-term tax certainty.
When implemented correctly, transfer pricing is more than a compliance obligation. It becomes a strategic mechanism for:
Transparent profit allocation
Cross-border tax certainty
Reduced regulatory friction
Stronger stakeholder confidence
Businesses that treat transfer pricing as an integral part of their UK-UAE operating model are better positioned to navigate regulatory change.
It refers to meeting both UK and UAE requirements to ensure intercompany transactions are priced at arm’s length and properly documented.
When annual turnover exceeds AED 200 million.
Multinational groups with global consolidated revenue above AED 3.15 billion.
Yes. HMRC actively reviews UK-UAE arrangements to prevent profit shifting.
Authorities may impose penalties, adjust taxable profits, or apply deemed income rules.
UK-UAE transfer pricing compliance is no longer optional — and it’s no longer simple. With increasing scrutiny from both HMRC and UAE tax authorities, robust, well-documented transfer pricing is essential.
Handled correctly, it becomes a tool for efficient profit flow, not a regulatory burden.
👉 Contact Theta 7 today for a transfer pricing audit and ensure your UK-UAE structure is compliant, defensible, and future-proof.
