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UAE Tax Agent (Federal Tax Authority) · Corporate Tax

UAE Tax CT Transfer pricing and connected persons: practice questions with answers

6 free exam-style questions on Transfer pricing and connected persons for UAE Tax CT Corporate Tax. Try each one, then open the answer to read the explanation. Fincora has 39 original questions on this syllabus area.

Question 1

Mr Rashed owns 100% of Rashed Perfumes LLC. None of the individuals below owns any interest in the company. Which of them is a Related Party of Mr Rashed under Article 35 of the CT Law?

  1. A The son of Mr Rashed's first cousin
  2. B The brother of Mr Rashed's business partner
  3. C Mr Rashed's first cousin
  4. D The long-serving manager of Mr Rashed's shop
Show the answer

Answer: C. Under Article 35(1)(a) of the CT Law, two or more natural persons are Related Parties if they are related to the fourth degree of kinship or affiliation, including by adoption or guardianship.

Counting degrees through the common ancestor: Mr Rashed to his parent (1), grandparent (2), uncle or aunt (3), first cousin (4), first cousin's child (5). So the first cousin is a Related Party and the cousin's son is not. The shop manager may be relevant to the connected-person rules if he is an officer of the company, but he is not a Related Party of Mr Rashed.

Question 2

Corvel Engineering LLC is wholly owned by Tamra Holdings LLC. Ms Huda sits on Corvel's board as a director but owns no shares in Corvel or Tamra, has no control rights and is not related to any shareholder. How is Ms Huda classified in relation to Corvel?

  1. A She is both a Related Party and a Connected Person of Corvel
  2. B She is a Related Party of Corvel but not a Connected Person
  3. C She is neither, because she holds no shares in Corvel
  4. D She is a Connected Person of Corvel but not a Related Party
Show the answer

Answer: D. The two definitions in the CT Law are different:

- Related Parties (Article 35): kinship to the fourth degree, 50% or more ownership, control, head office and PE, partners, trust and foundation links. A single non-owning director with no control rights does not fall within any of these.
- Connected Persons (Article 36(2)): owners, directors and officers of the taxable person, and their Related Parties.

So Ms Huda is a Connected Person but not a Related Party: payments to her are subject to the market-value limit in Article 36(1), but the arm's length rules for Related Party transactions in Article 34 do not apply to her.

Question 3

Lanterra Routes LLC owns proprietary route-optimisation software, and a related company abroad owns a unique customer-data platform. They jointly develop and run a logistics product; each makes unique and valuable contributions, their operations are highly integrated, and no reliable comparables exist for either party's role. Which transfer pricing method is most appropriate?

  1. A Transactional profit split method
  2. B Comparable uncontrolled price method
  3. C Resale price method
  4. D Transactional net margin method, with Lanterra as the tested party
Show the answer

Answer: A. Under Article 34(3) and 34(5) of the CT Law the most appropriate method is chosen in the light of the facts and the comparability factors.

The transactional profit split method is suited to cases where both parties make unique and valuable contributions (here, each owns key intangibles) and operations are highly integrated, so that neither party can be reliably benchmarked alone. One-sided methods (CUP, resale price, cost plus, TNMM) need either a comparable price or a tested party performing routine functions, and neither is available here.

Question 4

Quaymont Marine Services LLC's 2025 financial statements record a management fee received from a related party at a price that, according to its own benchmarking, is above the arm's length level. It wants to make a downward transfer pricing adjustment in its 2025 Corporate Tax return. According to the FTA's Public Clarification CTP011 (July 2026), which statement is correct?

  1. A It may adjust only after the FTA approves the adjustment through an advance pricing agreement
  2. B It may not adjust, because only the FTA can make transfer pricing adjustments to taxable income
  3. C It may adjust in the return without prior approval, provided the adjustment is properly supported
  4. D It may adjust in the return and leave the transaction off the related party schedule if it is small
Show the answer

Answer: C. Under Article 34 of the CT Law related-party transactions must reflect arm's length results. The FTA's Public Clarification CTP011 (July 2026) confirms that a taxable person may make a downward adjustment in its Corporate Tax return, without prior FTA approval, where a recorded related-party result is not arm's length, subject to FTA review. It must hold, before filing:

- a clear rationale and an arm's length analysis with benchmarking;
- a reconciliation between the financial statements and the return;
- evidence of the related party's corresponding adjustment.

Each transaction with a downward adjustment must be included in the related party transactions schedule regardless of the usual disclosure thresholds.

Question 5

Fernhill Industrial LLC is not part of any group. Its revenue was AED 215 million in 2025 and AED 185 million in 2026. For which tax periods must it maintain a master file and a local file?

  1. A 2025 only, the period in which its revenue is AED 200 million or more
  2. B 2025 and 2026, because once the threshold is met the requirement continues
  3. C 2025 and 2026, because its two-year average revenue is AED 200 million
  4. D 2026 only, because the requirement starts in the period after the threshold is met
Show the answer

Answer: A. Under Article 55 of the CT Law and Ministerial Decision No. 97 of 2023, the AED 200 million test looks at the taxable person's revenue in the relevant tax period.

- 2025: AED 215 million, at least AED 200 million: files required.
- 2026: AED 185 million, below AED 200 million, and no MNE group: not required.

There is no averaging or carry-over between periods.

Question 6

Ms Lamees owns 2% of the shares of Bareeq Glass LLC, which is neither listed nor regulated. She is not a director or officer and has no control rights. In 2025 Bareeq paid consultancy fees to her brother Faisal, who runs a licensed sole establishment and has no other link with Bareeq. Is Faisal a Connected Person of Bareeq, and what follows?

  1. A Yes: she is an owner and Faisal is her Related Party, so the fees are capped at market value
  2. B No: Ms Lamees holds under 50%, so neither she nor her brother is connected to Bareeq
  3. C No: only the relatives of directors and officers are treated as Connected Persons
  4. D No: Faisal is a Related Party of Bareeq, so only the arm's length rules of Article 34 apply
Show the answer

Answer: A. Under Article 36(2), Corporate Tax Law, a Connected Person of a taxable person includes (a) an owner of it, (b) a director or officer of it, and (c) a Related Party of anyone in (a) or (b). There is no minimum ownership percentage for an owner. Faisal is Ms Lamees's brother (second degree of kinship), so he is her Related Party under Article 35 and therefore a Connected Person of Bareeq.

Under Article 36(1) a payment to a Connected Person is deductible only to the extent it corresponds to the market value of the service and is incurred wholly and exclusively for the business. The listed and regulated exceptions do not apply to Bareeq.

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