Transfer Pricing Adjustments in UAE Corporate Tax Returns: What FTA Clarification CTP011 Means for Your Business

Related party transactions are one of the areas the Federal Tax Authority (FTA) examines most closely in UAE Corporate Tax. In July 2026, the FTA published Public Clarification CTP011, which confirms how businesses can make downward transfer pricing adjustments in their Corporate Tax returns. It also sets out the disclosure and documentation the FTA expects in return.

With the 2025 Corporate Tax return due by 30 September 2026 for calendar-year businesses, now is the right time to check how your related party transactions are priced, recorded and reported. This guide explains CTP011, the related FTA clarifications, and what finance teams and auditors should do.

Key Takeaways Taxpayers must self-assess transfer pricing adjustments where related party transactions are not recorded at arm's length. Downward adjustments no longer require prior FTA approval, but may be examined in an FTA audit. All related party transactions with downward adjustments must be disclosed, regardless of value. Strong documentation is required: rationale, benchmarking, reconciliation and evidence of the corresponding adjustment. The FTA's summary of private clarifications (up to May 2026) confirms several practical positions on QFZP status, interest and loss transfers.

 

A Quick Refresher: The Arm's Length Principle

Under the UAE Corporate Tax Law, transactions between Related Parties must meet the arm's length standard, meaning they must be priced as independent parties would price them. Payments to Connected Persons, such as owners, directors and their related parties, are deductible only to the extent they reflect market value and are incurred wholly and exclusively for the business.

Where the price recorded in the financial statements differs from the arm's length price, the taxpayer adjusts taxable income in the Corporate Tax return. The adjustment can go in either direction.

Type	What It Does	Illustrative Example
Upward adjustment	Increases taxable income	A UAE company pays a related party a management fee of AED 1.2 million; the arm's length fee is AED 900,000. Taxable income is increased by AED 300,000.
Downward adjustment	Decreases taxable income	A UAE company charges a related party AED 2 million for services; the arm's length price is AED 1.6 million. Taxable income may be reduced by AED 400,000, provided the conditions in CTP011 are met.

 

What Does CTP011 Say?

Self-Assessment Without Prior Approval

CTP011 confirms that taxpayers must self-assess appropriate transfer pricing adjustments where related party transactions are not recorded at arm's length in the financial statements. Downward adjustments no longer require prior FTA approval. Any adjustment may still be reviewed as part of an FTA tax audit.

Mandatory Disclosure

Every related party transaction with a downward adjustment must be disclosed in the return, regardless of its value or nature. This applies even if the business is below the threshold that would otherwise require a related party transactions schedule.

Documentation the FTA Expects

• A clear rationale explaining why the original pricing was not at arm's length and how the adjustment achieves an arm's length result.
• A benchmarking analysis supporting the arm's length outcome.
• A reconciliation between the amounts in the financial statements and the arm's length amounts in the Corporate Tax return.
• Evidence of a symmetrical corresponding adjustment made by the related party for the same transaction.

The last point is critical. The FTA wants to avoid income disappearing from both sides of a transaction. If your UAE entity reduces its income, you should be able to show that the counterparty has recognised the matching increase.

CTP011 does not cover corresponding adjustments initiated by the FTA or transfer pricing adjustments made by a foreign tax authority.

Other Useful Positions from the FTA's Private Clarifications Summary

Alongside CTP011, the FTA published a consolidated summary of positions taken in private clarifications issued up to May 2026. While private clarifications apply only to the applicant's facts, the summary gives useful insight into the FTA's thinking:

• QFZP status and transfer pricing: a free zone company that has not recorded related party transactions at arm's length can still keep QFZP status, provided it makes appropriate adjustments in its Corporate Tax return.
• Interest paid to individuals: interest paid to a natural person who is a Connected Person can be deductible, if it is at arm's length and meets the interest limitation rules.
• Tax loss transfers: the 75% common ownership condition can be satisfied through beneficial ownership, not only legal ownership.
• Participation exemption: for tax periods starting on or after 1 January 2025, the asset composition test applies only where the participation is a Related Party.
• Free zone substance: adequate substance remains a fact-specific test; having employees does not by itself prove the condition is met.

Do You Need Formal Transfer Pricing Documentation?

Under Ministerial Decision No. 97 of 2023, a Master File and Local File are required only where a business has revenue of AED 200 million or more in the tax period, or belongs to a multinational group with consolidated revenue of AED 3.15 billion or more. Businesses below these thresholds do not have to prepare formal files, but they must still price transactions at arm's length. Under CTP011, anyone making a downward adjustment needs documentation to support it, whatever their size.

Where the Financial Statement Audit Fits In

Transfer pricing adjustments begin with the accounts. Auditors are required under ISA 550 to identify and assess related party relationships and transactions, and the audited financial statements are the starting point for the Corporate Tax computation. Good coordination between the finance team, tax advisers and statutory auditors helps ensure that:

• related party disclosures in the financial statements match those in the Corporate Tax return;
• year-end intercompany charges and true-ups are recorded before the accounts are finalised; and
• the reconciliation between book values and arm's length values is prepared alongside the audit, not after it.

Action Checklist for Finance Teams

1. List all related party and connected person transactions for the tax period, including management fees, loans, cost recharges and director remuneration.
2. Compare recorded prices with arm's length evidence and identify any upward or downward adjustments.
3. For downward adjustments, prepare the rationale, benchmarking, reconciliation and evidence of the counterparty's corresponding adjustment before filing.
4. Disclose every downward adjustment in the Corporate Tax return.
5. Review earlier returns. If a prior-year position is no longer supportable, consider a voluntary disclosure.
6. Build transfer pricing checks into your year-end close so adjustments are identified before the accounts are signed.

How Al Nuaimi Auditors Can Help

Our UAE Corporate Tax advisers help businesses review related party transactions, prepare supportable transfer pricing positions and file accurate returns. As experienced financial statement auditors, we understand how related party disclosures in the accounts connect to the tax return. That helps close the gaps the FTA is most likely to question.

Frequently Asked Questions

What is FTA Public Clarification CTP011?

CTP011 is a UAE Corporate Tax public clarification issued by the FTA in July 2026. It explains the conditions, disclosure and documentation requirements for downward transfer pricing adjustments made by a taxpayer in its Corporate Tax return.

Do I need FTA approval for a downward transfer pricing adjustment?

No. CTP011 confirms that downward adjustments do not require prior FTA approval. They must be self-assessed, disclosed and documented, and may be reviewed in an FTA audit.

What documentation supports a downward adjustment in the UAE?

A rationale for the adjustment, a benchmarking analysis, a reconciliation between financial statement and arm's length values, and evidence of the symmetrical corresponding adjustment by the related party.

Who must prepare a Master File and Local File in the UAE?

Businesses with revenue of AED 200 million or more in the tax period, or members of multinational groups with consolidated revenue of AED 3.15 billion or more, under Ministerial Decision No. 97 of 2023.

Can a free zone company keep QFZP status if its related party pricing was not at arm's length?

According to the FTA's summary of private clarifications, it can keep QFZP status if it makes appropriate transfer pricing adjustments in its Corporate Tax return.

 

Review Your Related Party Transactions Before You File Speak to our Corporate Tax and audit team about transfer pricing adjustments, documentation and your Corporate Tax return. Ahmed Saleh Al Nuaimi Auditors and Accountants Office No. 215, Abdulla Ahmad Mohammed Bin Fahad 4, Al Qusais 2, Dubai, UAE Tel: +971 4 323 1183  |  Mobile: +971 55 899 5971 Email: mail@alnuaimiauditors.com Website: alnuaimiauditors.com/contact

Official Sources

• FTA Public Clarification CTP011 (tax.gov.ae)
• FTA Summary of Private Clarifications issued up to May 2026 (tax.gov.ae)
• Ministerial Decision No. 97 of 2023 on transfer pricing documentation; Federal Decree-Law No. 47 of 2022

Disclaimer: This article is for general information only and reflects UAE legislation and FTA guidance available as at 15 September 2026. It does not constitute tax, legal or audit advice. Specific advice should be obtained before acting on any matter discussed.