What are the three Documentation Pillars of Transfer Pricing?

The UAE’s prevailing status as a dynamic international trade hub and the recent introduction of corporate tax mean that Multinational Enterprises (MNEs) need to consider transfer pricing rules while carrying out cross-border transactions with its divisions or subsidiaries. As per the regulations of transfer pricing, the price of services, products or intellectual property (IP) should be at arm’s length.


It means the transfer price should be the same between intercompany transactions as it would have been had the company done the transaction with any other entity that is not part of the group. Transfer pricing documentation is the most critical aspect MNEs need to consider in order to defend themselves against possible tax litigation. It will help the companies demonstrate that the transactions have been carried out at Arm’s Length.

In this article, we are going to walk you through three documentation Pillars of Transfer Pricing that are required by any MNE to be Transfer Pricing Compliant in any Jurisdiction. The OECD has recommended three-tiered Transfer Pricing documentation requirements. They are:

Tier I – Master File

The Master File offers a global overview of the company’s transfer pricing. The Master File includes high-level information about the company’s global operations and transfer pricing policy. As per the OECD guidelines, the following information must be included in the transfer pricing master file:

  • Organizational structure
  • Geographic locations of operations
  • Main value/profit drivers
  • Descriptions of business activities of business units (products and services)
  • Intangible assets
  • Intercompany financing
  • Enterprise financials and tax positions

Tier 2: Local File

The preparation of the transfer pricing local file is specific to each country for documenting the activities of the business units operating in that jurisdiction. The local file provides detailed information about the local company’s intra-company transactions. Local files are filed with the tax authority for the jurisdiction.

The information that should be included in Local File are:

  • Management Structure of Local Entity
  • Intercompany transactions executed during the year
  • Related intercompany agreements
  • Transfer Pricing methodology and application
  • Local Entity Financials

Tier 3: Country-by-Country Reports

The CbC report is required to set out specified financial data of the Group by tax jurisdiction in a prescribed template. Additionally, a list of constituent entities by country of residence with an indication of their activities is to be reported. ‘Constituent Entity’ is defined as any separate business unit of the group, including companies together with permanent establishments that prepare separate financial statements for any purpose (including management control and tax compliance).

The information that is required to be captured in CbC Report for all Constituent Entity are:

  • Revenues (related, unrelated and total)
  • Profit/Loss Before Income Tax
  • Income Tax Paid (cash) & accrued
  • Number of Employees
  • Stated Capital & Accumulated Earnings
  • Tangible Assets other than cash & cash equivalents

Threshold for TP Documentation in UAE

As per Ministerial Decision No (97) of 2023, exemption has been given to certain taxpayers from maintaining the masterfile and local files. As per regulations threshold limits is, for taxpayers that are part of an MNE group with consolidated revenues of more than or equal to AED 3.15 billion or taxpayers with more than or equal to AED 200 million revenues in the relevant tax period are required to maintain UAE transfer pricing documentation. However it does not mean that taxpayers are free to transfer goods or products or provide services to associate enterprises at will and charge prices which are not at arm’s length. Since the UAE is a member of OECD, hence UAE tax administration (The FTA) and taxpayers have to follow the OECD guidelines for transfer pricing transactions. If you are still confused or uncertain about transfer pricing documentation requirements, consult with the best transfer pricing advisers in Dubai, UAE.

Avail of the Best Transfer Pricing Services in Dubai, UAE

The OECD’s Three-Tiered Approach, encompassing Country-by-Country Reporting, Master Files, and Local Files, serves as a foundational framework to enhance transparency and consistency in transfer pricing practices. These documentation pillars empower tax authorities to assess the fairness of intercompany transactions, prevent profit shifting, and ensure that multinational enterprises pay their fair share of taxes in each jurisdiction. Transfer pricing advisers in Dubai such as Tax Gian, a brand of Jitendra Tax Consultants (JTC) provide reliable assistance for businesses.

Tax Gian’s team of tax experts in Dubai offers top-notch corporate tax advice for all businesses. Since 2001, Jitendra Chartered Accountants, an associate of JTC, has been providing end-to-end advisory services including tax solutions in Dubai, UAE to its clients globally. Our transfer pricing services in Dubai include:

  • Transfer pricing planning & strategy
  • Structuring transfer pricing policies
  • Transfer pricing risks assessment
  • Transfer pricing documentation assistance
  • Advance Pricing Agreements (APAs)