The UAE’s Corporate Tax framework has introduced clear rules on how related party transactions must be priced. For many businesses, this brings uncertainty around transfer pricing audits and tax adjustments.
To address this, the Federal Tax Authority introduced the Advance Pricing Agreement (APA) framework on December 30, 2025. A Corporate Tax Advance Pricing Agreement in the UAE allows you to agree upfront with the tax authority on how specific related party transactions will be priced for tax purposes.
What is an Advance Pricing Agreement?
An Advance Pricing Agreement (APA) is a formal and legally binding agreement between you and the Federal Tax Authority.
Through this agreement, both sides agree in advance on the Arm’s Length Price that will be used for transactions between related parties or connected persons. These transactions can include goods, services, financing, or intellectual property.
The main purpose of a tax advance pricing agreement is to give you certainty. Instead of waiting for a tax audit to find out whether your pricing is acceptable, you receive confirmation upfront.
Once it is approved, the agreement is binding on both you and the FTA for the agreed period, as long as you follow the stated conditions.
Types of Advance Pricing Agreements
1. Unilateral Advance Pricing Agreement (UAPA)
A Unilateral APA is a domestic transaction agreement between you and the FTA. These are particularly relevant if you have transactions between:
- Mainland and free zone companies
- Group entities operating under different tax treatments
Cross-border unilateral APAs are expected to be introduced in 2026.
2. Bilateral and Multilateral APAs
In future phases, the UAE plans to introduce:
- Bilateral APAs, involving one foreign tax authority
- Multilateral APAs, involving multiple tax authorities
These will be useful for large multinational groups with complex cross-border operations.
Timeline for the Advance Pricing Agreements
- December 30, 2025: The FTA released the APA Guide and opened applications for domestic Unilateral APAs
- 2026: Cross-border Unilateral APAs are expected to be introduced
- Future phases: Bilateral and Multilateral APAs will follow
An APA usually covers a period of three to five years.
Who Should Apply for the Advance Pricing Agreement?
An Advance Pricing Agreement is not meant for every business. It is designed for cases where transfer pricing risk is high. Simple transactions covered by safe harbor rules, like low-value services, usually do not qualify for APAs.
You should consider applying if:
- Your related party transactions exceed AED 100 million per tax period
- Your pricing structure is complex
- You operate between Mainland and Free Zone entities
- You want certainty before filing under UAE tax regulations
How to Apply for Advance Pricing Agreement in the UAE
The APA application process happens in four stages:
1. Pre-filing consultation
You have to meet with the FTA to discuss your transactions and confirm whether they are suitable for an APA. This step is mandatory.
2. Formal application
If the FTA invites you to proceed, you should submit a detailed application within two months. This includes financial data, transfer pricing analysis, and benchmarking.
3. Evaluation and negotiation
The FTA reviews your submission, challenges assumptions where needed, and discusses the pricing method with you.
4. Agreement signing
Once both parties agree, the APA is signed and becomes legally binding.
It costs AED 30,000 to apply for an APA, with a renewal fee of AED 15,000. You are also required to file an annual APA declaration to confirm ongoing compliance.
Work with Expert Tax Consultants from A&A Associate
Staying compliant with Corporate Tax in UAE can be challenging to business owners unfamiliar with local tax regulations. Our expert tax advisory team can guide you through compliance requirements and understand transfer pricing rules. Get in touch for a free consultation!
