Intercompany management fees between UAE group entities: pricing, paper and VAT

Why this suddenly matters

Before Corporate Tax, a management fee between two UAE group companies moved profit but not tax, and nobody looked hard. At 9% — and with free zone entities at 0% sitting next to mainland entities at 9% — the same charge now moves real tax, and it is precisely the transaction the transfer pricing rules were written for. Charges that shift profit toward the 0% entity draw the most attention of all.

Test one: arm's length

Related-party transactions must be priced as independent parties would price them. For routine management and back-office services that usually means cost plus a modest margin, supported by a method you can name. Payments that reach owners or directors face a second hurdle: deductible only to the extent they reflect market value of a genuine service. Above the ministerial thresholds, the charges are disclosed with the tax return — and larger groups also maintain transfer pricing documentation, so the number must be born defensible, not defended later.

Test two: VAT does not care that it's family

• A management fee between two legal entities is a taxable supply at 5% — being in the same group changes nothing by default
• The paying entity needs a valid tax invoice from the charging entity to recover the input VAT, subject to its own recovery position
• A registered VAT tax group removes intra-group supplies from VAT entirely — but the group registration has its own conditions, and CT and VAT grouping are separate regimes with separate rules; being grouped for one does not group you for the other

Test three: the service must be real

The cleanest pricing fails if there is nothing behind it. An intercompany agreement signed before the charges start, a description of the services actually delivered, a cost base that reconciles to the charging entity's ledger, and invoices raised on a regular cadence — that is the evidence file. A single year-end journal labelled 'management fee' with no agreement, no invoice and a suspiciously round number is not a transaction; it is a finding waiting to be written.

How Orbit applies this

Orbit posts intercompany charges only against the agreement and invoice as evidence, keeps both sides' entries mirrored so the charge never exists in one ledger only, applies the VAT treatment consistently, and shows related-party flows on their own report — the same view a reviewer would build, available before they ask.