The introduction of the UAE Corporate Tax regime under Federal Decree-Law No. 47 of 2022 has placed increased emphasis on transfer pricing compliance for entities involved in related-party transactions. Multinational groups, free zone companies, and family businesses frequently seek clarity on how often transfer pricing benchmarking studies must be updated.
This article outlines the key benchmarking requirements under the UAE Corporate Tax framework. It explains the mandatory three-year full benchmarking refresh cycle, the annual financial update obligation, and the circumstances requiring an immediate benchmarking refresh.
Understanding Benchmarking Requirements under UAE Transfer Pricing Rules
The UAE Federal Tax Authority (FTA) Transfer Pricing Guide, aligned with the OECD Transfer Pricing Guidelines (2022), sets out clear expectations for benchmarking documentation to support arm’s-length pricing of related-party transactions. The main requirements are:
- Conduct a full benchmarking study every three years
- Perform annual updates of financial data for comparable companies
- Trigger an immediate benchmarking refresh when material business changes occur
This framework reflects international best practice and balances compliance rigor with practical efficiency.
The Three-Year Full Benchmarking Refresh Explained
A full benchmarking study involves a detailed comparable company search, application of screening filters, selection of final comparables, and construction of the arm’s-length range.
According to Section 5.3 of the FTA Transfer Pricing Guide:
- A full benchmarking refresh is required every three years when operating conditions remain consistent
- This includes reassessing the functional profile and economic environment to ensure comparability criteria remain valid
Limiting full benchmarking to a three-year cycle reduces administrative burden and cost for businesses.
To simplify compliance, UAE businesses can follow this benchmarking cycle:
| Year | Requirement | Description |
| Year 1 | Full benchmarking study | Complete comparable search and arm’s-length analysis |
| Year 2 | Annual financial update | Refresh financial data; no new comparable search required if facts unchanged |
| Year 3 | Annual financial update | Update financials and recalculate arm’s-length range |
| Year 4 | Full benchmarking refresh | Conduct new full benchmarking study with updated search |
Annual Financial Updates: Keeping Benchmarking Current
While full benchmarking occurs every three years, the FTA mandates annual updates of comparable companies’ financial data. This requires:
- Updating financial figures for the latest fiscal year of all comparables
- Recalculating arm’s-length ranges based on updated data
- Confirming that controlled transactions remain consistent with the refreshed range
Annual updates ensure benchmarking documentation remains relevant and reliable throughout the benchmarking cycle.
When Business Changes Require Immediate Benchmarking Refresh
Certain business events require an immediate full benchmarking refresh regardless of the regular cycle. The FTA specifies triggers including:
- Functional changes (e.g., shifting from distributor to commission agent)
- Acquisition or disposal of significant assets such as valuable intangibles
- Changes in risk profile (e.g., transferring inventory risk to another entity)
- Significant economic changes such as market disruption or restructuring
- Amendments to contractual terms affecting related-party transactions
When these occur, the existing comparable set may no longer represent arm’s-length conditions, and a new benchmarking study must be prepared within the same financial year.
Practical Implementation for UAE Businesses
To comply with Transfer Pricing rules, businesses should adopt a structured approach:
- Every three years: Conduct a comprehensive full benchmarking study including a new comparable search and functional profile validation
- Every year: Update financial data, recalculate arm’s-length ranges, and document results in an annual benchmarking memorandum
- When material business changes occur: Perform an immediate benchmarking refresh reflecting updated functions, risks, or economic conditions
Maintaining contemporaneous, thorough documentation is essential to managing transfer pricing risk and satisfying FTA compliance expectations.
Conclusion
The UAE Transfer Pricing benchmarking framework strikes a balance between regulatory precision and practical compliance. Full benchmarking studies are required every three years, with annual financial updates to maintain documentation accuracy. Immediate refreshes are mandatory when significant changes impact business functions, assets, risks, or contracts.
By following this structured approach, UAE businesses can effectively manage transfer pricing compliance, reduce administrative burden, and meet the Federal Tax Authority’s expectations.
About SimplySolved
As a UAE FTA Approved Tax Agency and an ISO 9001, 27001, and 42001 certified provider, SimplySolved supports businesses in managing Corporate Tax and Transfer Pricing compliance.
Our approach combines practical guidance with structured compliance processes, enabling companies to efficiently manage transfer pricing benchmarking requirements including the three-year full refresh and annual financial updates. By providing best practices and proactive strategies, SimplySolved helps businesses remain compliant under UAE tax regulations.
This summary is intended as a general guide and should not be relied upon as binding or specific advice regarding your tax obligations. We strongly recommend seeking professional legal and tax guidance tailored to your individual circumstances.
