The UAE has opened a new route for large companies to settle a thorny tax question before it becomes a dispute. Under a framework launched by the Federal Tax Authority (FTA), businesses can now apply for an Advance Pricing Agreement (APA) — a formal deal that locks in, for several years, how they price transactions between related companies within their own group.
The move matters because “transfer pricing” — the value companies assign to goods, services, royalties or loans passed between their own subsidiaries — has become one of the most scrutinised areas of tax worldwide. Get it wrong, and a company can face lengthy audits and penalties years later. An APA removes that uncertainty by securing the tax authority’s sign-off in advance.
Nilesh Ashar, Head of Middle East Tax at FTI Consulting, said the framework reflects a broader shift in how the UAE positions itself to global investors. “In an environment, where transfer pricing is a key focus for tax authorities, securing certainty through an APA is not merely administrative convenience — it is strategic protection,” Ashar told Khaleej Times.
That certainty is particularly relevant given how the UAE’s corporate tax system now works. Since the introduction of corporate tax in 2023, companies operating in free zones can still qualify for a zero per cent rate — but only if their dealings with related companies are priced at arm’s length, meaning as if the two parties were unconnected businesses negotiating independently.
Nils Vanhassel, Partner and Head of Tax Middle East at Addleshaw Goddard, said this creates a strong incentive for free zone businesses to seek an APA. “The 0% free zone rate is conditional on pricing related-party transactions at arm’s length, and a business that gets this wrong can lose the zero per cent rate for the entire year,” he said.
For now, the FTA is starting with domestic transactions only — deals between companies inside the UAE, rather than across borders — because a free zone company and a mainland company can be taxed differently despite sitting in the same country. Applications also carry an indicative financial threshold. “The APA Guide has set a financial threshold: the total or expected arm’s-length value of controlled transactions covered by APA must be at least Dh100 million per tax period. For tax groups, this threshold applies at group level,” Ashar said.
Cross-border applications are expected to open later, something the FTA has said it will announce during 2026.
Getting an agreement is not simply a matter of paying the formal application fee of Dh30,000. Vanhassel said that fee is only a small part of the overall cost. “The real commitment is management time, advisory costs and annual compliance reporting over a process that can run a year or more,” he added.
He added that businesses should weigh that investment against the transaction’s scale and how often it recurs, since an APA typically runs for three to five years.
The process itself follows four stages, according to FTI Consulting: a mandatory pre-filing consultation to confirm eligibility; formal submission of a detailed application; an evaluation and negotiation stage that can involve site visits; and a concluding agreement that becomes binding for the period it covers. Ashar said: “In today’s corporate tax landscape, certainty is not an option. It is a competitive advantage.”
Both experts agreed the framework strengthens the UAE’s case as a regional business hub, particularly as it competes with centres such as Singapore, which has run a similar programme for years. Vanhassel pointed to how quickly the UAE has built the system, given that corporate tax itself only took effect in June 2023. “The speed at which the UAE has launched its APA programme is remarkable… something that you would expect from tax authorities that have decades of experiences dealing with tax and transfer pricing behind them, such as Japan or the United States,” he added.
Within the Gulf, the UAE is not alone: Saudi Arabia introduced its own APA programme in 2024, while Bahrain’s minimum tax rules brought comparable transfer pricing standards into force from 2025. Experts say the UAE’s willingness to apply the rules domestically, not just cross-border, sets it apart from its neighbours — and signals that predictability, not just low rates, is becoming central to its pitch to global business.
Source: Khaleej Times