Understanding Advance Pricing Agreements (APA) under UAE Corporate Tax

Advance Pricing Agreement UAE Guide | 2026 Official Rules

There is one major update for the businesses dealing with related-party transactions. Companies that are looking for ways to manage their tax risks and ensure clarity can enter into Advance Pricing Agreements (APAs) with FTA. 

Now, the question comes: what APAs can say about a mechanism that brings certainty and cooperation to transfer pricing matters?

In simple terms, an APA is an agreement between a taxpayer and the Federal Tax Authority (FTA) that sets out how the Arm’s Length Price (ALP) for certain transactions with related parties will be determined over a fixed period. These can be said as “rules of the game” upfront, so everyone knows where they stand.

The FTA has issued Corporate Tax Guide CTGAPA 1, which provides a clear pathway on how APAs work in the UAE, the procedures for applying, and how they are monitored.

Why consider an APA?

Entering into an APA isn’t just paperwork—it comes with benefits for businesses that are seeking certainty of markups in their related-party transactions:

1. Predictability: You’ll know upfront how transactions will be treated for tax purposes, helping with tax planning and financial forecasting.

2. Cooperation: APAs encourage open discussions with the FTA in a non-confrontational way.

3. Reduced disputes: Agreeing on pricing in advance reduces the risk of long audits or legal battles over transfer pricing.

4. Avoidance of double taxation: Bilateral or multilateral APAs can prevent conflicting tax adjustments in different countries.

5. Simplified compliance: The APA clearly outlines what documentation is needed, making record-keeping much easier.

Summarising the above, we can say that an APA is a tool to turn uncertainty into clarity, which provides businesses with confidence that their related-party transactions are correctly priced and tax-compliant from day one.

Types of APAs in the UAE

The UAE APA framework currently has three types of arrangements/agreements, each is applicable for different business scenarios:

1. Unilateral APA (UAPA)

• Unilateral APA is an agreement entered into between a taxpayer and the FTA. It applies to domestic or cross-border transactions but is binding only in the UAE.

• For domestic transactions, the related party must follow the agreed Arm’s Length Price (ALP).

• For cross-border transactions, there are chance of double taxation if the foreign tax authority disagrees with the pricing arrangement under UAPA.

• Where such an issue comes there are solutions available to enter into Bilateral APA (BAPA) or the Mutual Agreement Procedure (MAP) to resolve conflicts.

2. Bilateral APA (BAPA)

• A Bilateral APA is agreed between the UAE and a single foreign tax authority.

• It provides certainty for both countries, ensuring that the agreed pricing is recognized and respected across borders.

3. Multilateral APA (MAPA)

• A Multilateral APA involves more than two countries, making it ideal for global businesses with complex supply chains.

• MAPAs offer even greater certainty than bilateral agreements, reducing the risk of tax disputes in multiple jurisdictions.

• At present, the UAE APA programme is focused on UAPAs, but the FTA plans to gradually expand to BAPAs and MAPAs. Guidance on these will be issued in due course.

Who Can Apply and Eligibility

Businesses proposing or entering into significant related-party transactions may apply for an APA. 

APA Eligibility Criteria in the UAE

To be considered for an APA, the total value of the related-party transactions proposed for coverage must be at least AED 100 million per tax period. Further, for tax groups, this threshold is applied at the group level, aggregating transactions with related parties outside the group.

However, crossing this threshold doesn’t automatically guarantee approval. The FTA also looks at:

1. Complexity of the transactions

2. Potential tax risks

3. Overall benefit of the APA

Certain transactions are excluded under safe harbour rules, such as low-value-adding intra-group services.

Domestic transactions can also qualify for the APA, particularly when the parties are subject to different tax rates or incentives. Examples include:

1. A Qualifying Free Zone Person (QFZP) doing business with a mainland entity

2. Transactions involving government entities outside their mandated activities

3. Transactions between extractive businesses and other business units

To summarise, the APA process is focused on material, complex, and high-risk transactions where an agreement with the FTA would deliver the most value.

The APA Process in the UAE

The APA process generally follows four main stages:

1. Pre-Filing Consultation

• This is a non-binding discussion with the FTA to check the feasibility, scope, and transfer pricing methodology. 

2. APA Application

• Once pre-filing approval is obtained, the formal APA application must be submitted within 2 months or at least 12 months before the first tax period covered.

• The application should include:

1. Details of the controlled transactions

2. Proposed transfer pricing method

3. Functional and economic analysis

4. Critical assumptions underlying the APA

3. Evaluation and Negotiation

• The FTA reviews all submitted information and may request meetings or site visits. Based on its evaluation, it shares its transfer pricing analysis, and negotiations may follow.

• If an agreement cannot be reached, the application may be closed, and fees are non-refundable.

4. Conclusion and Implementation

• Once both parties agree, the APA is signed and becomes binding for the agreed transactions and tax periods, as long as all terms are met.

Duration, Fees, and Compliance:

• APAs typically cover 3 to 5 prospective tax periods

• Application fee: AED 30,000 (non-refundable)

• Renewal fee: AED 15,000

What happens after an APA is in place?

Taxpayers must submit an APA Annual Declaration for each covered period. The FTA may review compliance, and an APA can be revised, cancelled, or revoked if critical assumptions are breached or misrepresented.

APAs can also be renewed if the underlying facts and assumptions remain unchanged, without requiring a new pre-filing consultation.

Why Businesses Should Consider APAs

For companies involved in significant or complex related-party transactions, APAs act as a clear roadmap, reducing uncertainty and fostering a cooperative relationship with the FTA.

They help:

• Prevent disputes over transfer pricing

• Avoid double taxation across jurisdictions

• Save time and resources in audits or litigation

In short, an APA is more than just compliance—it’s a proactive tool to manage transfer pricing risk while building confidence and trust with the UAE tax authorities.

How a Flying Colour Tax Consultant Can Help

Flyingcolour Tax consultant, being pioneers in the industry, we assist businesses with:

✔ Pre-audit reviews

✔ VAT & Corporate Tax reconciliations

✔ Audit representation before the FTA

✔ Penalty reconsideration

✔ Compliance framework implementation

To learn more about Understanding Advance Pricing Agreements (APA) under UAE Corporate Tax, 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.