The FTA just said yes — here’s how (and what it’ll cost you if you get it wrong)

Here’s a question we’ve been getting a lot lately from CFOs and finance teams across Dubai and Sharjah, one that comes up often in conversations with tax consultants in UAE:

“We sold goods to our related company above market price. Can we adjust that down in our tax return and pay less Corporate Tax?”

Short answer: Yes — if you can prove it.

The Federal Tax Authority just released Public Clarification CTP011, and it’s essentially a rulebook for one of the most powerful (and most misunderstood) moves in UAE Corporate Tax: the downward Transfer Pricing (TP) adjustment. It’s a clarification every business handling corporate tax filing in UAE should have on its radar.

Let’s break it down.

The Core Rule

Under Article 34(1) of the Corporate Tax Law, every transaction between related parties has to reflect the arm’s length price — basically, the price two unrelated businesses would have agreed to.

The problem is, real life is messy. Intercompany pricing is often set for cash flow, group strategy, or plain old convenience — not because someone ran a benchmarking study first.

So when your books don’t match the arm’s length price, the Tax Return is where you fix it. And that fix can go two ways:

• Upward adjustment → increases your taxable income
• Downward adjustment → decreases your taxable income

CTP011 is entirely focused on that second one — because reducing your tax bill is exactly the kind of move the FTA wants to watch closely.

Example 1: The Easy Case

Scenario: Your UAE company sells goods to a related entity at a price below arm’s length. You correct it in your tax return with an upward adjustment, raising your taxable income to match the arm’s length result.

Disclosure requirement: You only need to report this in the Tax Return if the transaction value crosses the FTA’s prescribed threshold.

Simple enough — this is the low-drama scenario.

Example 2: The One That Needs Real Backup

Scenario: Your UAE company sells goods to a related entity at a price above arm’s length — maybe you were pricing for group cash flow reasons. You now want to bring taxable income down with a downward adjustment to reflect the true arm’s length result.

Disclosure requirement: This one must be disclosed in the Tax Return regardless of the value or nature of the transaction. No threshold escape hatch. If you’re lowering your tax bill, the FTA wants to know about it  every time.

What You Need in Your Back Pocket

Here’s the part that actually matters for planning: the Corporate Tax Law runs on self-assessment. You don’t need FTA pre-approval to make a downward adjustment, though most businesses still bring in a corporate tax consultant to get the position right from the start.

But — and this is a big but — that adjustment can absolutely be picked apart in a Tax Audit. This is exactly where experienced tax advisory firms earn their keep. So before you touch that number, you need to be holding:

• The “why” — a documented rationale explaining why the original price didn’t reflect arm’s length, and how the revised figure does
• The proof — a proper arm’s length analysis, including a benchmarking study
• The reconciliation — a clean bridge between what’s booked in your Financial Statements and what’s declared in your Tax Return
• The mirror image — confirmation that the related party on the other side of the transaction has made a symmetrical corresponding adjustment

Miss any one of these four, and a downward adjustment stops looking like tax compliance and starts looking like a tax position you can’t defend.

One Important Boundary

CTP011 only covers adjustments made by you, under Article 34(1). It does not cover the separate “corresponding adjustment” mechanism — where the FTA adjusts a related party’s income following your own adjustment, or where a foreign tax authority adjustment triggers a UAE-side correction. Those sit under different provisions entirely and follow their own process.

The Takeaway

A downward TP adjustment isn’t a loophole — it’s a legitimate tax position, backed by law, that many UAE groups are entitled to use when their intercompany pricing didn’t land at arm’s length, provided it’s built with the guidance of experienced tax consultants in UAE. But the FTA has been unambiguous: no benchmarking study, no reconciliation, no corresponding adjustment on the other side means no defensible adjustment.

If your group has intercompany transactions priced above market and you haven’t looked at whether a downward adjustment applies — that’s tax sitting on the table.

Got intercompany transactions that might not be arm’s length?

Talk to TSAC’s corporate tax consultants in Dubai and let’s find out what a proper TP study could mean for your tax position — before the FTA finds out for you.

The Syndicate Advisors and Consultants LLC (TSAC)

UAE Corporate Tax, VAT & Transfer Pricing Advisory

tsac-uae.com  |  Office 607, A B Center, Sheikh Zayed Road, Al Barsha, Dubai