Related Party Transaction Review Services

Businesses operating in the United Arab Emirates may enter into transactions with shareholders, group companies, directors, management personnel and other connected individuals or entities. These arrangements can include management fees, intercompany loans, shared operating costs, consultancy charges, service agreements, asset transfers and payments to business owners.

Under UAE Corporate Tax legislation, transactions between Related Parties must generally comply with the arm’s-length principle. Payments or benefits provided to Connected Persons are also subject to specific requirements when determining whether the expenditure is deductible for Corporate Tax purposes.

Gupta Accountants provides Related Party Transaction Review Services in Dubai and across the UAE. We help businesses review transaction terms, supporting documents, accounting treatment and relevant tax requirements to identify potential compliance issues and areas requiring further attention.

Our reviews are designed to help businesses understand their related-party arrangements, improve documentation and support the preparation of accurate Corporate Tax returns.

What Is a Related Party Transaction Review?

A Related Party Transaction Review examines transactions between businesses and persons or entities that have a relevant ownership, control or other relationship under UAE Corporate Tax rules.

The purpose is to assess whether the transactions have been appropriately recorded, whether their terms reflect the applicable tax requirements and whether sufficient evidence exists to support the business's tax treatment.

A review may be particularly useful where a business:

• Operates through multiple companies under common ownership.

• Pays management or consultancy fees to another group company.

• Receives or provides loans to shareholders or related entities.

• Allocates shared costs between group companies.

• Pays remuneration or provides benefits to owners, directors or other Connected Persons.

• Buys or sells goods, assets or services from related businesses.

• Has domestic or cross-border transactions with related entities.

• Needs to prepare or review Corporate Tax disclosures.

Related Party Transaction Review is closely connected with transfer pricing, but it can also involve accounting records, expense deductibility, tax return disclosures and the commercial rationale for transactions.

Related Parties and Connected Persons Under UAE Corporate Tax

Related Parties and Connected Persons are separate concepts under UAE Corporate Tax legislation. A business should assess each relationship using the relevant legal definitions rather than treating the terms as interchangeable.

Who Is a Related Party?

Related Party status generally arises from specified relationships involving ownership, control or other relationships described in the Corporate Tax legislation.

Depending on the circumstances, Related Parties may include:

• A parent company and its subsidiary.

• Companies under common ownership or control.

• An owner and a business in which the relevant ownership or control relationship exists.

• Other persons connected through relationships specified in the legislation.

The precise status depends on the applicable statutory tests and the facts of the arrangement.

Who Is a Connected Person?

Connected Persons include specified relationships such as an owner of a taxable business, a director or officer of the business, and a Related Party of any of those persons, subject to the relevant legal definitions.

Payments or benefits provided to Connected Persons require particular attention because the deductibility rules may apply even where the payment is not simply an ordinary transaction between two group companies.

For example, a company paying a director for services, reimbursing an owner for business expenses or providing a benefit to a connected individual should retain evidence of the services or benefit received and the basis for the amount paid.

The relevant definitions should be checked against the facts and current legislation.

Our Related Party Transaction Review Services

Gupta Accountants assists businesses in identifying, reviewing and documenting related-party transactions relevant to their UAE Corporate Tax obligations.

1. Related Party Identification and Transaction Mapping

The first step is to identify the relevant relationships and understand the transactions taking place between the parties.

We can help review:

• Group ownership structures and corporate relationships.

• Shareholders and entities under common control.

• Directors, officers and other potentially Connected Persons.

• Intercompany transaction listings.

• Related-party balances in the general ledger.

• Domestic and international transactions.

• Changes in ownership or group structure during the tax period.

The outcome is a clearer overview of the transactions that may require tax review, documentation or disclosure.

2. Arm’s-Length Transaction Review

Transactions between Related Parties must generally be conducted in accordance with the arm’s-length principle. This means considering whether the conditions and pricing are consistent with those that would be agreed between independent parties in comparable circumstances.

Our review may consider:

• The nature and commercial purpose of the transaction.

• The functions performed by each party.

• Assets used and risks assumed.

• Contractual terms and actual conduct.

• The pricing method used by the business.

• Available market information and comparable arrangements.

• The supporting rationale for the price or fee charged.

The appropriate analysis depends on the transaction. A service fee may require different evidence from an intercompany loan, a transfer of goods or a licensing arrangement.

Where a detailed economic analysis or benchmarking study is required, the scope of work should be agreed according to the complexity and value of the transactions.

3. Management Fees and Intercompany Service Charges

Management fees and service charges between related companies should be supported by evidence of the services provided and a reasonable basis for the amount charged.

We can help review:

• Management service agreements.

• Invoices and payment records.

• Descriptions of services provided.

• Allocation methods for shared services.

• Staff and operating cost schedules.

• Evidence of the recipient's business benefit.

• The basis used to calculate the fee.

• Consistency between contractual terms and actual services.

The review helps identify whether the records adequately explain the transaction and whether the pricing and tax treatment require further assessment.

4. Intercompany Loans and Financing Arrangements

Loans between related companies or between a business and a Connected Person can have important Corporate Tax implications.

The terms should be examined in light of the parties' circumstances and the arm’s-length principle. Relevant factors may include the interest rate, loan duration, repayment terms, security, currency and credit risk.

Our review may cover:

• Loan agreements and amendments.

• Principal amounts and outstanding balances.

• Interest calculations and payment records.

• Repayment schedules.

• The commercial purpose of the financing.

• The basis for the interest rate and other terms.

• Relevant accounting entries and tax adjustments.

Businesses should not assume that an interest-free loan or a loan carrying a fixed interest rate is automatically acceptable for Corporate Tax purposes. The arrangement should be assessed according to its actual terms and the applicable rules.

5. Connected Person Payments and Benefits

Payments to owners, directors and other Connected Persons may require review to establish whether the expenditure meets the applicable Corporate Tax deductibility conditions.

Examples may include:

• Director or management remuneration.

• Consultancy fees paid to connected individuals.

• Reimbursements of business expenditure.

• Payments for services or assets.

• Other benefits provided in connection with a business.

For relevant payments or benefits, the business should be able to demonstrate the nature of the services or benefits received and support the amount claimed. Deductibility is subject to the applicable conditions, including the requirement that the payment or benefit correspond to the market value of the service or benefit received and the relevant business-purpose requirements.

Our review helps businesses identify missing evidence, unclear payment descriptions or arrangements that may need further explanation.

6. Shared Costs and Expense Allocations

Groups often allocate expenses such as administrative support, staff costs, technology, premises and other central services between related entities.

The allocation should be supported by a reasonable method that reflects the nature of the costs and the circumstances of the businesses involved.

We can help review:

• Shared cost schedules.

• Allocation keys and calculation methods.

• Supporting invoices and payroll information.

• Service descriptions and agreements.

• Intercompany debit notes or invoices.

• Reconciliations between group entities.

• The consistency of the accounting treatment.

A documented allocation methodology can help explain why an expense was charged to a particular entity and how the amount was calculated.

7. Related Party Transaction Documentation

Appropriate documentation helps a business explain its transactions and support its Corporate Tax treatment.

Depending on the transaction and applicable requirements, relevant records may include:

• Signed agreements and amendments.

• Invoices and payment confirmations.

• Transaction summaries and general ledger extracts.

• Calculations supporting fees, interest or allocations.

• Business purpose and service descriptions.

• Pricing analyses and relevant market evidence.

• Ownership and relationship information.

• Reconciliations between accounting records and tax return disclosures.

Some taxpayers may also have specific transfer pricing disclosure or documentation obligations. The exact requirements depend on the applicable legislation, decisions and the taxpayer's circumstances.

8. Corporate Tax Return and Disclosure Review

Transactions with Related Parties and Connected Persons may affect the calculation of Taxable Income and the information required in a Corporate Tax return.

We help review relevant transaction schedules and supporting records to identify items that may need adjustment, disclosure or additional explanation.

This may include checking that:

• Related-party transactions have been identified.

• Relevant connected-person payments have been assessed.

• Tax adjustments are consistent with the applicable rules.

• Transaction totals reconcile with the accounting records.

• Required disclosures have been considered.

• Supporting information is available if requested by the FTA.

The review is intended to support accurate reporting. It does not replace a full transfer pricing study where one is required.

Common Related Party Transactions We Review

Transaction typeKey review considerationsManagement feesServices provided, calculation basis, commercial benefit and pricingIntercompany loansInterest rate, repayment terms, credit risk and loan documentationShared operating costsAllocation method, supporting expenses and consistencyConsultancy chargesScope of work, deliverables, fee basis and evidence of servicesSale or purchase of goodsPricing, contractual terms and comparable market informationAsset transfersValuation, transaction terms and accounting treatmentDirector or owner paymentsNature of services or benefits, market value and deductibilityRoyalties and licence feesRights provided, commercial terms and pricing supportCross-border group transactionsArm’s-length pricing, relevant disclosures and supporting records

The table provides examples rather than a complete list. The requirements for each transaction should be assessed according to its specific facts.

Our Related Party Transaction Review Process

Step 1: Understand the Business and Ownership Structure

We obtain information about the business, its related entities, ownership arrangements and the nature of its activities.

Step 2: Identify Relevant Transactions

We review available accounting records and transaction listings to identify arrangements that may involve Related Parties or Connected Persons.

Step 3: Examine Transaction Terms and Evidence

We review contracts, invoices, payment records, calculations and other available documents to understand how each transaction operates.

Step 4: Assess Tax Treatment and Pricing

We consider the relevant Corporate Tax requirements, including the arm’s-length principle, connected-person payment rules and applicable reporting obligations.

Step 5: Identify Gaps and Potential Adjustments

We highlight missing documentation, unclear transaction descriptions, potential pricing concerns and matters that may require further analysis.

Step 6: Provide Practical Recommendations

We explain the areas requiring attention and help the business prioritise improvements to its records, transaction arrangements or tax reporting processes.

The scope and depth of the review depend on the number, value and complexity of the transactions involved.

Why Related Party Transaction Reviews Matter

Supporting Corporate Tax Compliance

A structured review can help businesses identify transactions that need further consideration when calculating Taxable Income or preparing Corporate Tax disclosures.

Improving Documentation

Clear agreements, invoices, calculations and supporting evidence help explain the commercial purpose and terms of related-party arrangements.

Identifying Pricing Concerns

Reviewing transaction terms can help identify cases where the pricing basis requires further analysis or additional supporting evidence.

Improving Group Reporting

Businesses operating multiple entities can benefit from consistent intercompany records, reconciliations and reporting procedures.

Preparing for FTA Information Requests

The FTA may request information supporting the arm’s-length nature of transactions. Maintaining organised records can help businesses respond more effectively within the applicable timeframe.

Related Party Transactions and UAE Transfer Pricing Rules

Transfer pricing is the framework used to assess the pricing and conditions of transactions between Related Parties and Connected Persons under the relevant UAE Corporate Tax provisions.

The arm’s-length principle applies to relevant domestic and cross-border transactions. The fact that both parties are located in the UAE does not, by itself, remove a transaction from transfer pricing requirements.

Depending on the taxpayer and the transactions involved, the applicable rules may require the business to consider:

• Whether transaction terms meet the arm’s-length standard.

• Whether the Corporate Tax return requires relevant disclosures.

• Whether additional transfer pricing documentation must be maintained.

• Whether a Master File or Local File is required.

• Whether the FTA has requested supporting information.

• Whether adjustments to Taxable Income may be necessary.

The thresholds and documentation conditions should be assessed under the current UAE rules. Businesses should not assume that every related-party transaction requires the same level of documentation or that a particular disclosure threshold applies to all taxpayers.

For broader transfer pricing analysis, including benchmarking and formal documentation, Gupta Accountants can also assist with related Transfer Pricing Services UAE.

Frequently Asked Questions - Corporate Tax Group Services

1. What is a Related Party Transaction Review in the UAE?

It is a review of transactions between a business and persons or entities that meet the relevant Related Party or Connected Person definitions. The review considers transaction terms, pricing, accounting records, supporting evidence and applicable Corporate Tax requirements.

2. Do UAE Corporate Tax transfer pricing rules apply to domestic transactions?

Yes. The FTA explains that transfer pricing rules apply to relevant transactions involving Related Parties and Connected Persons whether the parties are located in the UAE mainland, a free zone or a foreign jurisdiction.

3. What is the arm’s-length principle?

The arm’s-length principle requires relevant transactions between Related Parties to be priced and structured consistently with the conditions that would apply between independent parties in comparable circumstances.

4. Are Related Parties and Connected Persons the same?

No. These are distinct concepts under UAE Corporate Tax legislation. A relationship may need to be assessed separately under the relevant definitions, depending on the parties involved and the nature of the transaction.

5. Are management fees between group companies subject to review?

Management fees may require review to establish what services were provided, whether the recipient received a business benefit, how the fee was calculated and whether the terms are consistent with applicable requirements.

6. Do intercompany loans need to be at arm’s length?

Relevant loans between Related Parties or Connected Persons should be assessed under the transfer pricing rules. Factors such as the interest rate, duration, repayment terms and credit risk may be important in evaluating the arrangement.

7. Are payments to directors and owners deductible for Corporate Tax?

The treatment depends on the nature of the payment and the applicable rules. For relevant Connected Person payments or benefits, the amount must meet the market-value requirement and the applicable business-purpose conditions. Supporting evidence should be retained.

8. Does every business need a Local File and Master File?

Not necessarily. The requirement depends on the applicable UAE transfer pricing documentation rules and the taxpayer's circumstances. Businesses should assess the relevant conditions rather than assume that the same documentation obligations apply to every company.

9. Can related-party transactions between UAE free zone and mainland companies be reviewed?

Yes. The relevant Corporate Tax and transfer pricing requirements should be assessed based on the parties' tax status, the transaction and the applicable rules. Free zone status does not automatically remove a transaction from transfer pricing requirements.

10. How can Gupta Accountants help?

Gupta Accountants can help identify relevant transactions, review agreements and accounting records, assess pricing and tax treatment, identify documentation gaps and support Corporate Tax reporting considerations.

Contact Gupta Accountants for Related Party Transaction Review Services

If your business has transactions with group companies, shareholders, directors or other connected persons, a structured review can help clarify the applicable Corporate Tax requirements and identify areas requiring further attention.

Gupta Accountants assists businesses in Dubai and across the UAE with related-party transaction reviews, connected-person payment assessments and supporting Corporate Tax compliance.

Contact us to discuss your related-party transaction review requirements.

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