Benchmarking Report for Corporate Tax in UAE

A benchmark report helps UAE businesses comply with Corporate Tax and FTA rules by justifying profit margins under the arm’s length principle.

Figuring out corporate tax in the UAE can be confusing. Rules change often, and it is easy to miss something if you are not careful. That is where benchmarking comes in. It lets you compare your company’s transactions with other similar businesses to check if your pricing and margins are reasonable.

We at Xact Auditing work with UAE companies to handle benchmarking step by step. We make sure your numbers are accurate and compliant, and help you avoid unnecessary stress along the way.

What is Benchmarking Under UAE Corporate Tax?

Benchmarking is essentially a comparison exercise. It shows that dealings between related parties (like your company and its sister company, or you and a shareholder‑owned business) are priced as fairly as deals between independent companies. That matters because UAE tax law expects a fair “arm’s‑length principle (APL)” approach.

In practice, a benchmarking study under corporate tax in UAE will:

• Compare the financials of similar independent firms in the same industry.
• Check margins, costs, pricing strategies, and profit levels.
• Document a “tested party”, the firm under review, and justify that its figures are comparable with those of independent firms.

This helps prove you inter‑company transactions are legitimate and not just a way to shift profits or reduce tax. Failing to prepare proper benchmarking may expose businesses to corporate tax fines and  penalties.

Why Salary Benchmark Reports Are Important for FTA Compliance?

Salary benchmarking plays an important role for businesses in the UAE, especially when it comes to meeting Corporate Tax and transfer pricing requirements. By ensuring that salaries paid to connected persons match market standards, companies can significantly reduce the risk of tax disputes, penalties, or regulatory challenges.

Beyond compliance, salary benchmarking provides valuable insights into existing pay structures. It helps businesses identify areas where compensation can be optimized, supporting better tax efficiency and smarter financial planning. Regular benchmarking also allows companies to adapt their compensation strategies as market conditions and regulations evolve.

For UAE businesses, salary benchmarking is more than a compliance exercise—it’s a practical tool for managing tax exposure, maintaining financial stability, and making informed decisions in an increasingly competitive and regulated environment. Benchmarking report should be updated and reviewed on annual basis.

How a Benchmarking Study Works?

To ensure accurate benchmarking, businesses must first identify their related parties as required under UAE transfer pricing regulations.

Step 1: Functional Analysis

You start by mapping functions, assets, and risks (FAR analysis). What does your company actually do? Manufacturing, services, trading? What assets and risks does it hold? That determines which comparable companies to look for.

Step 2: Choose the Right Comparable

Once you know what your business does, the next step is to find similar companies to compare with. Look for firms that operate in the UAE or nearby regions. Focus on things like costs, profit margins, and overall returns. This helps you see if your pricing and profits make sense compared to others in the same industry.

Step 3: Decide on a Pricing Method

Your business type will decide which method works best. You might use:

• Comparable Uncontrolled Price (CUP) for simple product sales.
• Transactional Net Margin Method (TNMM) for services or more complex operations.

Pick the approach that shows your numbers fit within a reasonable range of other companies. The goal is to be able to explain your figures clearly if the tax authority asks.

Step 4: Record Everything Clearly

Once the data is ready, write it up in a report. Make notes about why you chose certain companies, any adjustments you made, and what your findings show. Keep copies of documents like financial statements, contracts, and industry reports. This way, everything is backed up if needed.

Step 5: Keep It Updated

Benchmarking isn’t something you do once and forget. If your business changes, like adding new products, different markets, or cost shifts, update your comparisons. Regular reviews make sure your corporate tax records stay accurate and compliant.

Common Benchmarking Errors That Trigger FTA Audits

• Using outdated market data. Industry conditions change fast in the UAE.
• Choosing poor comparable – size, geography, or business model must match closely.
• Ignoring hidden costs like freight, customs, or inter‑company fees.
• Forgetting to document why certain comparable were excluded.

With Xact Auditing, we help you avoid these mistakes. We track fresh data, choose accurate comparable, and produce transparent benchmarking reports that stand up to scrutiny. Benchmarking in UAE is no longer optional or a formality – it is mandatory and required.

Why Benchmarking Matters for UAE Businesses?

Reduce Risk of Tax Adjustments

If Related Person Transactions are not supported by a credible benchmarking report, UAE tax authorities may question your figures. That can lead to tax adjustments, penalties, or even disallowed deductions. Benchmarking gives you a defensible position.

Support For Transfer Pricing Documentation

Corporate tax compliance often requires documentation: master file, local file, and records of inter‑company transactions. A proper benchmarking study serves as strong evidence in your transfer pricing documentation.

Respectable Corporate Image and Investor Confidence

When your books are backed up by independent data, banks, investors, or prospective partners see you as transparent and trustworthy. This is especially useful if you operate across free zones, offshore structures, or multiple jurisdictions.

Role of Tax Consultants in Benchmarking Studies

You might manage small inter‑company deals yourself. But once volumes grow, or you deal with multiple entities, the complexity increases. At Xact Auditing, we combine audit, bookkeeping, tax, and transfer pricing services, so benchmarking becomes part of your overall compliance framework.

We ensure your financial statements, VAT returns, and corporate tax returns are aligned. If anything changes, like a new free‑zone license, different activity, or new shareholder, we will update your benchmarking and documentation accordingly. You stay covered and compliant with us!

Advice For UAE Businesses In 2026

With the UAE corporate tax law now in full force, benchmarking can also help small to medium businesses, not just large multinationals. Even if you operate a trading firm, a consultancy, or a free‑zone entity, benchmarking helps you:

• Justify pricing if you provide services to related persons
• Maintain transfer‑pricing documentation at an affordable cost
• Build trust with banks or investors when applying for finance or expansion

Plus, combining benchmarking with clean bookkeeping and timely audits makes your business more agile and audit‑ready.

Get Benchmarking Right with Xact Auditing

Benchmarking is more than a formality. It is part of a smart compliance and tax strategy for UAE businesses. If you want help selecting comparable, gathering data, drafting a full benchmarking report, and linking it to your corporate tax filings, Xact Auditing is here for you. Reach out to us today and let us take care of the complex work so you can focus on growing your business.