Transfer pricing errors tend to repeat. Across UAE groups now working through their first Corporate Tax cycles, the same handful of mistakes appear again and again, and most of them are avoidable with a little foresight. None of them is exotic. They are the practical gaps that open up when a group treats intra-group pricing as an afterthought rather than a standing discipline. Recognising them is the fastest way to close them.
No documentation, or documentation after the fact
The most common failure is simply not keeping the evidence. A group prices its transactions reasonably but records nothing, then tries to reconstruct the justification when the Authority asks. Contemporaneous documentation, prepared around the time of the transaction, carries far more weight than an analysis built under audit pressure to defend a number already filed. The absence of a file does not just weaken a position. It shifts the whole conversation onto the back foot.
Round-number fees with no basis
Management fees, royalties and service charges set at neat annual figures, with no link to actual costs, benefits or comparables, are a recurring red flag. A round number that reappears each year regardless of activity looks like a profit transfer, because it usually is one. The fix is to tie the charge to something real: a cost base and mark-up, a defensible allocation, or a benchmark. The number should be the output of an analysis, not the starting point.
Ignoring connected persons
Groups often focus on inter-company sales and forget the payments to owners, directors and their families. Salaries, rent for owner-owned premises, interest on shareholder loans, and fees to related individuals all fall under the connected-person rules and must be at market value to be deductible. This is one of the areas the Authority looks at first, and one groups most often overlook, because it does not feel like transfer pricing even though it is governed by the same principles.
Agreements that do not match reality
Intercompany agreements are frequently generic, out of date, or describe an arrangement different from what actually happens. When the paperwork says one thing and the accounts show another, the documentation works against the taxpayer. A parallel error is one-sided pricing, where a group tests one party's return but ignores whether the outcome makes sense for the other side of the transaction. Both leave a gap that a review will find.
What to do about it
Keep documentation contemporaneously, not retrospectively. Base every intra-group charge on real costs, benefits or comparables rather than a round figure. Bring connected-person payments, owner salaries, rents and shareholder interest, into the analysis. Align intercompany agreements with what the business actually does, and test both sides of each transaction. These are not sophisticated fixes. They are the difference between a transfer pricing position that holds and one that unravels the first time it is examined, and the effort of getting them right is far smaller than the cost of getting them wrong.
This article is general information on UAE transfer pricing and is not tax advice. The rules should be confirmed against current legislation. We would be glad to review your transfer pricing for these common gaps.