Strategic Tax Certainty in the UAE

Strategic Tax Certainty in the UAE: A Comprehensive Guide to the Advance Pricing Agreement (APA) Programme

 The FTA federal tax authority of the UAE, has entered a new phase and has started the advance pricing agreement (APA) in the month of December 2025. Businesses have now formally decided to achieve a long-term roadmap in tax. Nowadays, transfer pricing audits have become very much in demand. With the APA program, it has provided a shield for looking forward and made taxpayers agree on pricing before any disputes come up. 

This guide showcases how a business can use the new APA framework, which focuses on eligibility and the application process, which are in 4 stage also focusing on the critical arm’s length compliance. 

What is an Advance Pricing Agreement (APA)?

 A Formal agreement between FTA and a taxable person is called APA. In advance, this establishes the Arm’s length price for certain controlled transactions in a fixed period.

Under the phased rollout, the FTA is currently prioritising Unilateral APAs (UAPAs):

• Unilateral APA: It is an agreement between the taxpayer and the UAE FTA alone. It has provided certainty for UAE tax purposes but does not bind foreign tax administrations in cross-border cases.

• Domestic vs. Cross-Border: All Applications for domestic UAPAs are being accepted from December 30, 2025. The announcement for the commencement date for cross-border UAPA applications is later in 2026.

Is Your Business Eligible? The AED 100 Million Threshold

The APA programme is intended for transactions that are significant in value and involve a higher level of complexity. A business may consider applying for an APA where the total value, or the expected value, of the relevant controlled transactions reaches AED 100 million within a tax period.

Key Eligibility Considerations

Arm’s Length Assessment: At the application stage, the AED 100 million threshold is determined based on the arm’s length value of the transactions, as calculated by the applicant.

Tax Groups: For entities that form part of a tax group, transaction values are reviewed on a group-wide basis. In such cases, the threshold is assessed by aggregating applicable transactions both within and outside the group.

Safe Harbour Transactions: Certain transactions, such as those covered under Small Business Relief or low-value-adding intra-group arrangements, are excluded from the APA scope. These transactions are also not included when calculating the AED 100 million threshold.

The 4 Stages of the APA Process

The FTA follows a rigorous four-stage process to ensure that any agreement is based on sound economic reality. 

Stage 1: Pre-filing Consultation

At the 1st stage, it gives the assesses and the suitability of the APA before a formal application, the taxpayers must request a consultation. APA identifies potential complexities at the early stage. 

Note: A pre-filing consultation does not bind the FTA to agree.

Stage 2: Filing the APA Application

Once the person gets the notification from FTA to proceed, they have to apply, and the time frame is within 2 months. This requires a deep dive into functional and economic analyses, proposed benchmarking, and the selection of the most appropriate Transfer Pricing method. 

Stage 3: Evaluation and Negotiation

Once the FTA reviews all documents, they may conduct a site visit or interviews with some businesses personally. With this, the FTA will do a TP analysis and will do a negotiation with the taxpayers to reach the best possible pricing position. 

Stage 4: Conclusion and Implementation

Once both parties agrees the APA is signed and they agree to a minimum of three or a maximum of five TAX periods. 

Critical Assumptions: The Foundation of the Agreement

As long as the critical assumption remains true, then only the APA is valid. Below are the facts related to the validation of the agreement and they are as follows 

• Operational Factors: The operational factors are Consistency in business methods, functions performed, and assets used. 

• Economic Factors: There will not be any significant changes in market conditions or exchange rates.

• Legal Factors: There will not be any material changes in shareholding ratios or in any regulatory requirements. 

 If there is any breach in the critical assumption, the person must inform FTA within 20 working days. If the person fail to do so then there will be a cancellation of the APA. 

Fees and Deadlines for 2026

Effective January 1, 2026, a revised fee structure applies to all APA services.

Important Deadlines:

• Application Filing: A person must do the tax filing at least 12 months from the start of the first Tax period to be covered. 

• Annual Declaration: Each year, there should bean annual APA deceleration it must be within 90 working days of the tax year end or the due date of the tax return. 

To learn more about Strategic Tax Certainty in the UAE, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.