Master File & Local File Preparation

The Master File presents the group-wide picture — organisational structure, business description, intangible ownership, intercompany financing, and consolidated financial position — and is common across every entity in the group. The Local File is entity-specific, covering the UAE taxable person's own material related-party transactions, its FAR analysis, the method applied to each transaction category, and the benchmarking evidence supporting the pricing used. Ministerial Decision No. 97 of 2023 requires both where the applicable thresholds are met, and they serve different, complementary purposes for an FTA reviewer.

No. Neither document is submitted automatically alongside the Corporate Tax return. The obligation is to maintain both, keep them current, and produce them to the FTA within the stipulated period, generally 30 days, if the FTA requests them. What is filed with the return is the separate Related Party Transactions disclosure form, which is a shorter schedule, not the full Local File or Master File.

The Local File is required where the taxable person individually exceeds the prescribed standalone revenue threshold, or is part of an MNE Group meeting the prescribed consolidated group revenue threshold, under Ministerial Decision No. 97 of 2023. Both conditions are tested independently — an entity below the standalone threshold can still be caught through its group's consolidated position.

Ministerial Decision No. 97 of 2023 prescribes the Master File content in line with the OECD's BEPS Action 13 framework: the group's organisational structure, a description of its businesses and key value drivers, the ownership and location of important intangibles and related agreements, a description of the group's intercompany financing arrangements, and the group's consolidated financial and tax position. It is a narrative document about the group as a whole, not the UAE entity specifically.

A description of the UAE entity's business and its role in the group's value chain, a listing of its material related-party and connected-person transactions by category, the FAR analysis behind those transactions, the transfer pricing method selected for each category with supporting rationale, and the benchmarking analysis — comparable search, screening criteria, and resulting arm's length range — that evidences the pricing applied.

Often yes, with review — an existing global Master File can typically be adapted for UAE purposes rather than rebuilt from scratch, provided it genuinely reflects the group's current structure, intangible ownership, and consolidated financials. What cannot be borrowed from the parent's documentation is the Local File, which must be UAE-entity-specific and cannot rely solely on a foreign document's generic content.

The stipulated production period is generally 30 days from the FTA's request, though the precise timeframe should be confirmed against the specific request received and current FTA guidance. Because this window is short relative to the analytical work involved in a defensible study, PNPC's standard approach is to have both documents already built and indexed before any request arrives, not to start the analysis once the clock starts running.

If the FTA requests the documentation and the taxable person cannot produce it, or produces documentation that does not adequately support the pricing applied, the FTA can adjust the taxable income to what it considers the arm's length outcome would have been. This can mean additional Corporate Tax, administrative penalties for non-compliance, and interest on the additional tax from the original due date.

Method selection follows the FAR analysis, not the other way around. For each material transaction category we assess which party performs which functions, owns which assets including intangibles, and bears which commercial risks, and select the most appropriate of the five OECD-recognised methods — Comparable Uncontrolled Price, Resale Price, Cost Plus, Transactional Net Margin Method, or Transactional Profit Split — based on that analysis and the availability of reliable comparable data.

Yes, where the amounts are material. Payments and benefits to Connected Persons under Article 36 — owner or director salary, rent paid on premises they personally own, interest on shareholder loans — must be at market value to remain fully deductible for Corporate Tax purposes, and the Local File should document the benchmarking that supports those terms alongside the entity's related-party transactions.

The content requirements are the same, but a Qualifying Free Zone Person's Local File carries an additional, higher-stakes dimension: if related-party pricing with a mainland or foreign affiliate is found not to be arm's length, the FTA can recharacterise the income involved, which can affect whether it still counts as Qualifying Income and, in more serious cases, threaten the QFZP status itself if non-qualifying revenue exceeds the permitted threshold.

The financial data underlying the study is generally refreshed annually to reflect the tested party's actual results for the year. The underlying comparable company search itself is typically refreshed on a multi-year cycle, commonly every three years or sooner if the industry or the entity's functional profile changes materially, consistent with OECD guidance on documentation currency.

Yes, and this reconciliation is one of the most important quality checks PNPC performs before considering either document complete. The disclosure form is filed with the Corporate Tax return and is what the FTA sees first — if its figures do not match the Local File and the audited financial statements exactly, that mismatch is one of the most common triggers for a follow-up FTA information request.

No, though they are related tiers of the same OECD BEPS Action 13 documentation framework. CbCR, governed by Cabinet Resolution No. 44 of 2020 as amended, is a group-level, jurisdiction-by-jurisdiction financial breakdown filed with the Ministry of Finance, separate from the FTA. The Master File and Local File are governed by Ministerial Decision No. 97 of 2023 and are maintained for, and produced to, the FTA. A group above the CbCR threshold is very likely also in scope for the Master File and Local File, and PNPC scopes and builds all three together where applicable.

For a first-time engagement with reasonably prompt data turnaround, PNPC typically completes related-party mapping, FAR analysis, method selection, benchmarking, and full drafting of both documents within 6 to 8 weeks, timed to be filing-ready ahead of the Corporate Tax return due date. Delays in document collection from the client are the most common cause of timeline slippage.

Yes. For groups that have already passed one or more Corporate Tax financial years without formal documentation, we assess the exposure, reconstruct the best-available FAR analysis and benchmarking support for the closed periods using whatever records exist, and put a contemporaneous process in place going forward. Retrospective work is inherently constrained by data availability, but it puts the business in a materially stronger position than facing an FTA request with nothing on file.

PNPC scopes the engagement based on the number of related-party transaction categories requiring benchmarking, whether the Master File needs to be built new or can be adapted from an existing group document, the complexity of the FAR analysis, and whether this is a first-time build or an annual refresh. A fixed, written fee is agreed after an initial scoping call and before work begins.

Because the obligation to maintain contemporaneous documentation exists from the moment the thresholds are met, independent of whether a request is ever issued, and because a document built in the ordinary course — with FAR conversations held while they are current and a benchmarking search run without deadline pressure — is measurably stronger than one reconstructed inside a 30-day response window. Waiting also means several years of undocumented related-party activity can accumulate before the gap is discovered.

Transactions between members of a formal Corporate Tax Group election are eliminated on consolidation for Corporate Tax computation purposes, so they do not need the same arm's length pricing evidence as a standalone taxable person's related-party dealings. What the Tax Group election does not remove is the obligation for any Tax Group member's dealings with a related party outside the group, or payments to Connected Persons, which remain fully subject to Local File documentation at the Tax Group level.

The related-party map and threshold test are re-run at the point of conversion, since a mainland-Free Zone pairing that was previously two related but differently-taxed entities may become a single mainland structure, changing which transactions still need arm's length documentation and whether QFZP-related Local File considerations still apply for the period before conversion.

No, not directly. A UAE Local File is prepared to Ministerial Decision No. 97 of 2023's requirements and evidences the UAE entity's arm's length position; Indian transfer pricing documentation is a separate exercise under Section 92 of the Income-tax Act and the Indian TP Rules, with its own Form 3CEB accountant's report. Where a group has entities in both countries, PNPC prepares both from a consistent set of underlying facts so the two documents do not contradict each other, but one does not substitute for the other.

Ministerial Decision No. 97 of 2023 requires the Master File's content to be accurate and current — it does not itself prescribe a specific sign-off mechanism. In practice, where PNPC adapts an existing global Master File, we recommend confirmation from the group's finance or tax function that the document genuinely reflects current group structure and intangible ownership, since that confirmation is what supports the document's reliability if the FTA questions it.

No. CbCR, governed by Cabinet Resolution No. 44 of 2020, is a jurisdiction-by-jurisdiction financial summary filed with the Ministry of Finance. The Master File, governed by Ministerial Decision No. 97 of 2023, is a narrative document about the group's structure, intangibles, and financing, maintained for and produced to the FTA. A group above the CbCR threshold is very likely also in scope for the Master File, but the two documents serve different purposes and neither substitutes for the other.

The DIFC or ADGM's own companies and financial services regime — including any prudential or conduct-of-business filings the entity makes to its regulator — is entirely separate from its Corporate Tax transfer pricing obligation. We build the Local File to the identical standard we would for a mainland entity, drawing on the DIFC/ADGM entity's own licence, accounts, and intercompany agreements, without assuming the financial free zone's regulatory oversight substitutes for FTA-facing documentation.

A change of auditor does not itself require reopening a previously completed Local File, but the next annual refresh should reconcile the Local File's figures to the new auditor's financial statements, and any difference in presentation, classification, or accounting judgement between the outgoing and incoming auditor should be checked before assuming last year's reconciliation still holds unchanged.

The underlying market data supporting an owner or director remuneration benchmark should be refreshed periodically, consistent with the same annual-refresh discipline applied to the wider benchmarking study, rather than carried forward indefinitely on the assumption that market rates have not moved. Where the individual's role, responsibilities, or the company's size and complexity have changed materially, the benchmark should be re-tested regardless of how recently it was last done.

Yes, where the applicable method calls for them. Article 35's Related Party definition and the arm's length standard under Article 34 apply based on ownership and control, not on whether a border is crossed, so a purely domestic UAE-to-UAE Local File is built and benchmarked to the same standard as one involving a foreign parent — the geography of the comparable companies used in the benchmarking search is a separate question from the geography of the tested transaction itself.

An on-demand or revolving intercompany loan still needs its terms — the effective interest rate applied, any security, and the practical drawdown and repayment pattern over the year — benchmarked against what an independent lender would charge for a facility of comparable structure and credit risk, even though it lacks a conventional fixed maturity date. The absence of a fixed term does not remove the arm's length requirement; it changes what the benchmarking comparable set needs to reflect.

Ministerial Decision No. 97 of 2023 does not itself mandate a specific board approval step, but PNPC's standard practice is to have both documents formally reviewed and signed off by management or the Board before treating them as final, since that governance trail — a senior reviewer independent of the original preparer, and management or Board awareness of the conclusions — itself supports the arm's length position if the FTA later asks how the pricing was determined.

Yes, and this is often the practical approach for groups with tight Corporate Tax return deadlines — the FAR analysis, method selection, and benchmarking search can proceed on management accounts, with the Local File's financial figures and its reconciliation to the disclosure form finalised once the audit closes. What should not happen is treating a draft built on provisional figures as the final, retention-ready document without that final reconciliation step.

Yes, in the sense that it should be re-confirmed as current even where no material change occurred — the FTA's Transfer Pricing Guide expects documentation to be reassessed at least annually, and a Master File that is simply left untouched for several years, even with no obvious change, reads as unreviewed rather than confirmed accurate. A light-touch annual confirmation is a different, less costly exercise than a full rebuild, but it should still happen.

The financial inputs underlying a benchmarking study should be refreshed annually to reflect the tested party's and the comparable companies' actual results for the current year, even where the comparable company search itself is only refreshed on a multi-year cycle. Using a stale range with only the current year's revenue figure inserted, without updating the comparables' own current-year financial data, produces a Local File that looks maintained but is not genuinely reassessed.

A cost-sharing arrangement needs its own FAR analysis — which entities actually benefit from the shared function, how costs are allocated between them, and whether the allocation key genuinely reflects relative benefit — together with evidence that the arrangement is documented in a signed cost-sharing agreement and that the resulting charge to the UAE entity is arm's length, typically benchmarked using a cost-plus approach for routine shared services.

No — the content requirements under Ministerial Decision No. 97 of 2023 are the same in kind, but the depth is proportionate to the group's actual complexity. A small family group with two or three UAE entities under common ownership needs a properly reasoned Local File and, if the group threshold is met, a Master File, but it does not need the multi-jurisdiction analytical depth a large multinational's documentation carries — PNPC scopes each engagement to the group's genuine complexity rather than applying a single template regardless of size.

The UAE taxable person's own obligation to maintain a Master File does not depend on the parent's cooperation — where a parent will not share sufficient information, PNPC builds the Master File from whatever group-level information the UAE entity itself has access to (public filings, its own understanding of the group structure, information obtained through its own board or shareholder channels) and documents clearly what could not be independently verified, rather than leaving the Master File incomplete without explanation.

Whether a transaction with a government-related entity is a 'related party' transaction for Corporate Tax purposes depends on whether the ownership and control tests under Article 35 are actually met for that specific counterparty, not on the fact that a government entity is involved generally. Where the tests are met, the transaction is documented in the Local File to the same standard as any other related-party dealing; where they are not met, it falls outside the transfer pricing regime regardless of the counterparty's public-sector status.

VAT audits and Corporate Tax transfer pricing documentation are assessed under separate legal frameworks — Federal Decree-Law No. 8 of 2017 for VAT and Federal Decree-Law No. 47 of 2022 for Corporate Tax — but a concurrent VAT audit can surface intercompany transaction detail (invoicing, valuation of related-party supplies) that should be checked for consistency with what the Local File discloses, since an FTA officer working across both files can and does compare figures.

Where a genuinely unique or highly specialised transaction yields no reliable external comparables under the standard methods, the FAR analysis and available internal or partial evidence are used to build the most defensible arm's length position achievable, clearly documenting the search performed, why standard comparables were not found, and the reasoning behind the position ultimately taken — an honest, well-reasoned account of a genuine data limitation is materially stronger than a forced or superficial comparable set.

PNPC prepares Master File and Local File documentation in English as standard, since that is how the underlying agreements, ledgers, and financial statements are typically maintained, and arranges Arabic translation where a specific FTA request or submission requires it. The FTA accepts documentation and correspondence in both languages in practice.