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The APA programme offers a voluntary mechanism for a Person to enter into an agreement to determine the Arm’s Length Price of Controlled Transactions over a period and to prevent the risk of TP disputes and litigation. Transfer Pricing (“TP”) provisions were introduced in the UAE along with the Corporate Tax Law. Article 34 of the Corporate Tax Law requires that transactions or arrangements between Related Parties must meet the arm’s length standard.
Scope of APA
- Parties to the APA.
• Controlled Transactions covered by the agreement.
• Tax Periods covered by the agreement.
• Agreed TP criteria for determining Arm’s Length Price, including the definition of any relevant terms to be used in the agreement.
• Critical assumptions.
• Documentation and implementation mechanism.
Types of APA
Unilateral APA: A UAPA is an agreement between a Person and the FTA for domestic and cross-border Controlled Transactions. A UAPA between a Person and the FTA will provide the Person with an assurance on key criteria and assumptions to be followed for establishing the Arm’s Length Price for the Controlled Transactions during the period covered under the APA.
Bilateral APA: A BAPA is an agreement between competent authorities of two jurisdictions reached through a MAP. A BAPA provides tax certainty in relation to Controlled Transactions in the UAE and the relevant foreign jurisdiction.
Multilateral APA: A MAPA is a set of agreements between competent authorities of more than two jurisdictions reached through a MAP. MAPAs offer significant tax certainty as compared to traditional BAPAs in situations involving more than two jurisdictions.
Eligibility for an APA
A Person who has proposed or entered domestic and/or cross-border Controlled Transactions is eligible to enter into an APA under the APA programme. A Person may apply for an APA if there are significant uncertainties in determining the appropriate criteria for establishing the Arm’s Length Price of proposed or existing Controlled Transactions.
Domestic Controlled Transactions that may be covered under a UAPA include, but are not limited to, the following Controlled Transactions undertaken:
- By a Qualifying Free Zone Person with a Person based in mainland or vice versa
versa.
• By a Business or Business Activity of a Government Entity.
• By a Business or Business Activity of a Government Controlled Entity that is
not its Mandated Activities,
• Between an Extractive Business and another Business of such Person, or
• Between a Non-Extractive Natural Resource Business and another Business of
such a person.
Key benefits of APA
Predictability
Facilitated collaboration
Reduced Disputes
Prevention of double taxation
Prevention from risk of TP disputes, Streamlined compliance
STAGES OF APA
- Stage 1 – Pre-filing consultation
- Stage 2 – Filing of an APA application
- Stage 3 – Evaluation and negotiation of the APA
- Stage 4 – Concluding an APA and implementation
Stage 1 – Pre-filing consultation
A pre-filing consultation shall, inter alia, address:
• Scope of the APA, including proposed Controlled Transactions and period of
APA
• Details of other Controlled Transactions not proposed to be covered,
• Identification of the potential TP issues/ complexity,
• Evaluation of the suitability of the proposed TP methodology and other terms
proposed by the Person,
• Any prior APAs in foreign jurisdictions covering the same Controlled
Transactions or litigation history, and Other relevant information.Stage 2 – Filing of an APA application
A Person may submit an APA application upon receiving notification to proceed. The application must be filed within 2 months of the FTA notification or at least 12 months before the commencement of the first Tax Period to be covered under the APA, whichever is earlier.
• Controlled Transactions proposed to be covered,
• the Tax Period covered under the APA,
• the proposed TP method, proposed price, and relevant analysis, including industry analysis, functional and economic analysis, and the critical assumptions on which the Transfer Pricing methodology is based, etc.STAGE 3 – Evaluation and negotiation
Once site visits, interviews, meetings, and the collection of all required information and documents are complete, the FTA will commence its evaluation and analysis.
The FTA will evaluate and analyze the APA application, along with facts and information obtained during site visits, interviews, and meetings, and shall prepare a TP analysis that addresses the following:- the manner of determining the Arm’s Length Price (selection of the most appropriate method, acceptable filters, etc.),
- key criteria for determining the Arm’s Length Price over the Tax Periods covered under an APA, and any other terms and conditions (including critical assumptions).
Stage 4 – Concluding an APA and implementation
The FTA shall discuss the implementation of the agreement with the Person. The FTA and the Person shall sign the APA agreement based on terms mutually agreed APA is binding on signatories to the APA with respect to the Controlled Transactions for the Tax Periods covered under an APA.
If the Person who entered an APA complies with all terms and conditions of the APA, the FTA shall not contest the Arm’s Length Price or the transfer pricing method applied to the Controlled Transactions covered under the APA for the Tax Periods specified in the APA. However, an APA does not establish a precedent for any other Tax Periods of the Person, nor for any other Person that is not covered under the APA.
Advance Pricing Agreement-Annual Declaration
A Person with an APA agreement must file an APA Annual Declaration for each covered Tax Period, in the format prescribed by the FTA. The APA Annual Declaration must be filed by the later of the following:
- Within 90 Business Days of signing the APA, or
- The due date for filing the Tax Return.
In Conclusion: Advance Pricing AGREEMENT
The APA programme provides an effective framework for achieving transfer pricing certainty and minimizing disputes by allowing taxpayers to agree in advance on arm’s length pricing for Controlled Transactions. With clearly defined eligibility criteria, timelines, and compliance requirements, APAs promote predictability, transparency, and alignment with OECD best practices. For eligible taxpayers, the programme serves as a valuable tool to manage transfer pricing risks and ensure sustained compliance under the UAE Corporate Tax regime.
HOW RNG SUPPORTS YOU
- We support you in assessing APA feasibility and defining the right strategy.
- We support you in preparing comprehensive APA applications, including documentation, forecasts, and critical assumptions.
- Help you in preparing a complete APA documentation, including economic analysis and financial projections.
- Help you monitor results, manage renewals, and ensure continued alignment with APA terms.
- Parties to the APA.