Transfer Pricing Documentation: Best Practices for 2026

Transfer pricing documentation is no longer optional for multinational groups operating in the GCC. With the UAE's corporate tax regime now in effect and OECD Pillar Two on the horizon, robust TP documentation is your best defense against assessments and double taxation.

The Three-Tiered Approach

The OECD recommends a standardized three-tiered documentation approach adopted by most jurisdictions:

Best Practices for Local File Preparation

1. Start with functional analysis
   Map each entity's functions, assets, and risks before selecting a TP method. This is the foundation — get it wrong and everything else crumbles.
2. Select the most appropriate method
   TNMM is the most commonly used method, but CUP is preferred when reliable comparables exist. Profit splits suit highly integrated value chains.
3. Use contemporaneous data
   Benchmarking studies should use data available at the time the prices were set, not hindsight data. Update searches at least every 3 years.
4. Document the economic rationale
   Explain WHY the pricing makes commercial sense, not just that it falls within an interquartile range. Tax authorities appreciate business logic.
5. Address all material transactions
   Don't cherry-pick profitable transactions. Include management fees, IP royalties, financing, and service charges — all must be arm's length.

Common Transaction Types

GCC-Specific Considerations

• The UAE's TP rules (from June 2023) require Local File and Master File for qualifying businesses, with strict contemporaneous documentation
• Saudi Arabia's GAZT requires TP documentation for transactions exceeding SAR 6 million with related parties
• Bahrain currently has no formal TP documentation requirements, but should be prepared for potential future legislation
• Country-by-Country Reporting thresholds apply at EUR 750 million consolidated group revenue