18 August 2026 · Adjustments
Transfer-Pricing Downward Adjustments
A downward transfer-pricing adjustment is where a taxpayer reduces related-party income or increases a deduction to reach an arm's-length result. Because it lowers taxable income, it is more sensitive than an upward adjustment, so the FTA's public clarification sets conditions on when it is allowed and how it must be evidenced. If an APA method implies periodic adjustments to stay within the arm's-length range, this guidance governs them. Confirm the exact clarification reference and date on tax.gov.ae before relying on it for a filing position.
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Adjusting to arm's length
Toward the correct range.
- Reduces related-party income, or
- Increases a related-party deduction.
- Aim is an arm's-length result.
- The opposite of an upward add-back.
It cuts the tax base
Sensitive by nature.
- Lower income means less tax.
- The FTA sets conditions on it.
- Evidence requirements are stricter.
- Not every adjustment is automatic.
Method-driven adjustments
Where the two meet.
- An APA method may need periodic adjustments.
- This clarification governs the downward ones.
- Document the basis carefully.
- Confirm the reference on tax.gov.ae.
Related guides
Frequently Asked Questions
For related-party pricing positions.
What is a downward transfer-pricing adjustment?
It is where a taxpayer reduces related-party income or increases a deduction to reach an arm's-length result. It moves your reported figures toward the correct range rather than adding income back.
Why is it treated as sensitive?
Because it lowers taxable income. The FTA's public clarification therefore sets conditions on when a downward adjustment is allowed and requires it to be properly evidenced.
Can I always make a downward adjustment?
No. It is not automatic. It has to meet the conditions in the FTA's clarification and be supported by evidence, which is why the basis needs careful documentation.
How does this relate to an APA?
If your agreed APA method implies periodic adjustments to stay within the arm's-length range, this guidance governs the downward ones. The two work together on related-party pricing.
Where do I confirm the rules?
On tax.gov.ae. Because the clarification is recent, confirm its exact reference and date before relying on it for a filing position.
Can Exiloz handle the adjustment?
Yes. We assess whether a downward adjustment is supportable, document the basis, and align it with your transfer-pricing method or APA.
Get the adjustment right
Exiloz assesses and documents a supportable downward transfer-pricing adjustment.