If you're a UK-based business looking to expand or structure more tax efficiently using a UAE entity, transfer pricing is a key consideration. We often get asked how to properly manage intercompany service transactions between your UK and UAE operations, so your structure remains compliant, defensible, and tax efficient.
What is Transfer Pricing?
Transfer pricing refers to the pricing of goods, services, or intellectual property exchanged between related companies across borders. Tax authorities, such as HMRC and the UAE Federal Tax Authority, expect these internal transactions to be priced as if they occurred between unrelated parties, known as the "arm's length principle."
In the UK-UAE context, this typically applies when your UAE entity charges your UK company for management support, technical services, IT, HR, finance, or other shared services.
Why Does Transfer Pricing Matter?
When the UAE entity charges fees to the UK business, this reduces the UK company's taxable profits. HMRC expects evidence that:
- The services are real and beneficial
- The fees are commercially justified
- The pricing is benchmarked against market comparables
Poor documentation or artificial charges can lead to penalties, adjustments or even double taxation.
Risks of Getting It Wrong
Failure to apply correct transfer pricing can lead to:
- Disallowed tax deductions in the UK
- Adjusted profits in UAE
- Penalties and interest charges
- Exposure to double taxation
- Loss of credibility in cross-border audits
Transfer pricing is not just about compliance, it's about building a resilient and tax-efficient global structure. If you're considering or already operating a UAE structure, it's essential to implement clear, well-supported intercompany service arrangements from day one.
We support UK businesses with:
- Transfer pricing policy design
- UAE corporate structuring
- Benchmarking & documentation
- Intercompany agreements & tax compliance
