Transactions between companies under common ownership, group entities, directors, owners or other connected persons need more than a bookkeeping entry. UAE Corporate Tax requires businesses to identify relevant relationships, consider the arm’s-length principle and retain enough evidence to explain the commercial terms. The FTA Transfer Pricing Guide and Corporate Tax General Guide provide the starting point.
This article sets out a practical workflow for identifying, pricing and documenting these transactions before filing.
Last reviewed: 15 September 2026
Table of contents
- What counts as a related-party issue
- A practical identification process
- Applying the arm’s-length principle
- Records and disclosures
- Common control failures
- Frequently asked questions
What counts as a related-party issue
Corporate Tax analysis may cover transactions between persons connected through ownership, control or other relationships specified in the legislation. Connected-person rules can also apply to payments or benefits involving owners, directors, officers or their relatives, depending on the circumstances. The correct classification is fact-specific.
Begin with an ownership and control chart. Include subsidiaries, parent entities, common shareholders, branches, trusts or foundations where relevant, and individuals who can influence decisions. Then compare the chart with the general ledger, vendor master, customer master and payroll records.
A practical identification process
Use a repeatable four-step review:
- Map relationships. Record ownership percentages, control rights, directorships and family or management connections.
- Extract transactions. Filter the ledger for loans, management fees, rent, service charges, reimbursements, dividends, asset transfers and payroll benefits.
- Classify each item. Decide whether it is related-party, connected-person, ordinary third-party or outside the scope of the review.
- Assign an owner. Give each material item a reviewer, evidence list, pricing method and conclusion.
Maintain business records that allow the relationship and transaction to be reconstructed after year end, consistent with the Corporate Tax filing workflow.
Applying the arm’s-length principle
The arm’s-length principle asks what independent parties would have agreed in comparable circumstances. The answer is not always a market price copied from the internet. Consider the functions performed, assets used, risks assumed, contractual terms, market conditions and expected benefit.
Possible evidence can include comparable third-party agreements, supplier quotations, external price lists, cost-plus workings, independent valuations and budgets. A management fee should describe the service, recipient benefit, allocation key and supporting time or cost records. A shareholder loan should have terms, repayment expectations and a rationale that reflects the borrower’s position.
Document the method before the return is submitted. If the result is an allocation, explain why the chosen driver is reasonable and apply it consistently.
Records and disclosures
Keep an annual related-party schedule with counterparty, relationship, transaction type, amount, currency, agreement, pricing method and year-end balance. Link each row to invoices, contracts and payment evidence.
Review whether a transfer-pricing disclosure, master file or local file is relevant under the applicable thresholds and decisions. Do not assume that a small transaction is automatically irrelevant; aggregate recurring items and consider the overall arrangement.
For connected-person payments, retain approval records and evidence that the amount is incurred for the business and meets the applicable conditions. Coordinate the tax file with VAT, accounting and audit work so that descriptions and values agree.
Common control failures
Businesses often miss transactions because they review only trade invoices. Other recurring gaps include undocumented director benefits, interest-free balances, shared-cost allocations, year-end journal entries and services billed by a group company without a contract.
Build a quarterly control: refresh the relationship chart, scan new vendors and customers, and ask management about new arrangements. Escalate unusual items before accounts close.
Practical transaction review examples
Management and shared-service charges
A group company may provide finance, human resources, technology, procurement or marketing support. The file should explain what was provided, who benefited, how the charge was calculated and how the recipient used the service. A short agreement, service description, time records and a reasonable allocation key are more useful than a generic invoice saying “management fee”.
Intercompany loans and balances
Review opening balances, new advances, repayments, interest, guarantees and settlement dates. Long-outstanding balances should be discussed with management rather than automatically described as trade payables. Keep approval minutes, loan terms, cash-flow rationale and payment evidence. If the arrangement changes during the year, update the schedule and pricing support.
Rent and shared premises
Where a shareholder, director or group company owns premises, compare the lease terms with available market evidence. Record the area used, services included, deposits, renewals and payment trail. If several companies share a facility, document the basis for allocating rent, utilities and other costs.
Asset transfers and disposals
Transfers of vehicles, equipment, intellectual property or inventory need a description, condition, ownership evidence and valuation support. Link the transaction to the fixed-asset register and tax calculation. A related-party price that is not supported can create questions even when the accounting entry is balanced.
A month-end control that works
At each month end, ask the finance team to review new suppliers, customers and journal entries against the relationship chart. Flag names that resemble group entities, payments approved by directors, unusual round-number entries and balances that remain open beyond normal terms. The objective is early visibility, not a new approval layer for every ordinary purchase.
At quarter end, management should sign the updated relationship declaration. The declaration should cover ownership changes, new directorships, family or connected-person relationships known to the business, new group arrangements and any benefits provided outside payroll. This creates a dated record of the information available when the accounts were prepared.
Working with auditors and advisers
Give the reviewer a clean transaction inventory rather than a collection of unlabelled invoices. Include a relationship chart, summary by counterparty, transaction totals, agreements, pricing analysis and unresolved questions. Ask the reviewer to identify missing evidence, not merely to accept a conclusion.
If an external auditor or tax adviser requests information, keep one controlled response pack. Record the date supplied, document version and outstanding action. Consistent evidence reduces the risk that accounting, VAT and Corporate Tax teams describe the same arrangement differently.
A final pre-filing checklist
- Has every owner, director and group entity been mapped?
- Were new vendors, customers and journal entries screened?
- Do contracts match the invoices and ledger descriptions?
- Is the pricing method explained in plain language?
- Are allocations based on a reasonable benefit driver?
- Are loans, guarantees and long-outstanding balances separately reviewed?
- Are connected-person benefits supported by approvals and business purpose?
- Do disclosures and schedules agree to the final accounts?
- Has a responsible person signed off the conclusion?
These controls are proportionate for an SME and can be maintained in a simple annual workbook. The key is consistency and a clear trail from relationship to transaction, transaction to price, and price to filed return.
When facts change
Refresh the review whenever ownership changes, a director joins or leaves, a new group service starts, a loan is renegotiated, or an entity begins trading with a new jurisdiction. Do not wait for year end to update the relationship chart. A dated change log helps the reviewer understand why a counterparty appears in one quarter and not another.
Where a transaction is material or unusual, take a short position memo to management before posting the entry. State the commercial purpose, proposed terms, evidence available and tax questions requiring advice. This turns related-party compliance into a business control rather than a last-minute disclosure exercise.
Finally, reconcile the related-party schedule to the return, financial statements and any required disclosure. Differences should be explained, approved and carried into the next-period opening schedule where relevant.
This process also improves commercial visibility. It shows which services are shared, where cash is being funded, which contracts need renewal and whether group arrangements still reflect the way the businesses operate. Tax documentation is therefore most effective when it is maintained as part of normal finance governance.
Keep the final schedule with the approved accounts and return calculation. That simple filing habit makes next year’s opening review quicker and gives management a clear record of the judgements made.
It also helps the finance team explain changes clearly when a counterparty, pricing method or allocation basis is updated.
That continuity is valuable when staff, advisers or group structures change during the year.
Keep the review practical, dated and connected to the accounts.
That discipline supports clearer decisions and fewer filing surprises.
Use the same review approach each quarter and retain the evidence with the accounts.
This makes annual filing preparation significantly easier.
Keep it current.
Review quarterly.
Document findings.
Frequently asked questions
Do all group-company transactions need a separate transfer-pricing report?
Not necessarily. Requirements depend on the law, thresholds, transaction type and the facts. The transaction should still be identified and supported.
What does arm’s length mean in simple terms?
It means considering what independent parties would have agreed in comparable circumstances.
Are payments to directors always connected-person transactions?
They may be, depending on the relationship and payment. Classify and document them based on the applicable rules.
Can a group use one allocation key for every service?
Only if it reasonably reflects the benefit and the nature of each service. Different services may require different drivers.
When should the review happen?
Start during the year, refresh it before year end and complete the final review before the Corporate Tax return.
Important: This article provides general information only and is not a substitute for advice based on your business's specific tax, legal, or financial position.
Accuverse can help create a transaction inventory, review pricing support and prepare a clear filing workpaper. Speak with our Corporate Tax team.
Official references
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