In brief
The FTA has issued Public Clarification CTP011 on downward transfer pricing adjustments made by a Taxable Person in the Tax Return. It resolves the question left open by the Corporate Tax Returns Guide (CTGTXR1, November 2024): under paras 9.3.4 and 16.1.9, a downward adjustment was permitted only upon successful application to the FTA. CTP011 now supersedes that position in practice, although the Guide itself has not been reissued.
Where Related Party dealings are not recorded at arm’s length, the correction can be made in the books before the Financial Statements close, or in the Tax Return. CTP011 speaks to the second route - and re-shapes it in three moves:
CTP011 is confined to downward adjustments — a vexed issue in the first corporate tax filing cycle, where the absence of a clear mechanism for the application to the FTA (then a pre-condition) produced inconsistent reporting positions across taxpayers.
If we connect the dots, the CTP011 outlines the regulator’s thought-process clearly i.e., arm’s length principle for controlled transactions is paramount. Ideally, the first check is the Financial Statements which should reflect transactions and arrangements with Related Parties on an arm’s length basis. In cases where a transaction or arrangement is not recorded at arm’s length in the Financial Statements, a Taxable Person is required to make an appropriate transfer pricing adjustment (upward / downward) in the Tax Return to comply with the arm’s length principle.
The evidentiary file: what must sit behind the adjustment
The obligation for any TP adjustment hasn't disappeared — it has changed form, from a permission sought before filing to a position defended after it. Where a Taxable Person makes a downward adjustment in the Tax Return, they should maintain sufficient documents, including but not limited to the following:
Corresponding adjustments under Articles 34(10) and 34(11) of the Corporate Tax Law are expressly outside CTP011's scope.
Food for thought
CTP011 answers the procedural question cleanly. It leaves a number of finer threads for taxpayers — and their advisers — to think through:
- A duty, or an election? - where a transaction or arrangement is not recorded at arm’s length in the Financial Statements, a Taxable Person “must make an appropriate TP adjustment” (upward / downward) in the Tax Return to comply with the arm’s length principle — read together, is declining a downward adjustment still open to a taxpayer?
- The QFZP dimension – In the Summary of FTA Private Clarifications issued up to May 2026, the FTA confirmed that a TP adjustment made in the Corporate Tax Return to align Related Party transactions with the arm's length principle will not jeopardise a QFZP's qualifying status.
- Related Party vs. Connected Persons (CP) nuance – CTP010 (issued in April 2026) expressly clarified that if a person qualifies as both a CP and a Related Party, then such person will be considered exclusively as Related Party. As a corollary, the CTP011 clarification would apply to transactions involving such persons.
- Each adjustment stands alone – The Tax Return provides no mechanism to offset upward against downward adjustments; read with CTP011's unconditional disclosure rule, every downward adjustment stands as its own line.
- No threshold, no shelter — CTP011 is clear: taxpayers can no longer take shelter under the standard RPT disclosure threshold to avoid reporting downward TP adjustments.
- Positions taken in first filing cycle – Implications of positions taken for any downward TP adjustments, during the first filing cycle, need to be assessed considering CTP011. Intent is clear; the rationale and underlying analysis (including benchmarking) is a must.
- Symmetry without the machinery - The taxpayer is to ensure the counterparty’s symmetrical corresponding adjustment — while Articles 34(10) and 34(11) sit outside scope. What does “ensure” mean where the counterparty cannot, or need not, adjust? Taxpayers should expect the FTA to test whether the counterparty has genuinely booked the offsetting position and documented accordingly.
- No secondary adjustment - Unlike several mature regimes, the UAE (via CTP011) asks only for a return-level correction. There is no requirement to operationalise the transactions or arrangement through movement of funds. Is this a deliberate design, or a chapter on secondary adjustment still to be written?
What taxpayers should do
1. Fix the price before the accounts close - the in-books route remains the cleanest; the return-level route now carries a permanent disclosure trail.
2. Build the file contemporaneously - rationale, benchmarking, reconciliation and symmetry evidence, ready by filing day.
3. Settle a range-point policy - decide where downward adjustments land, apply it consistently, record the reasoning.
4. Revisit first-cycle and free zone positions - Positions taken for any downward TP adjustments, during the first filing cycle, deserve a deliberate second look, considering CTP011.
Closing thought
Together with the APA programme and the disclosure-led design of the Tax Return, CTP011 confirms a direction of travel: the FTA is trading ex-ante gatekeeping for an ex-post, risk-based assessment architecture. In that world, the taxpayers who fare best are those whose files are audit-ready on the day they file.
For further information, please contact
Amit Dattani
Head of Transfer Pricing
