Including radiative transfer processes within the urban canopy layer into microscale urban climate models (UCMs) is essential to obtain realistic model results. These processes include the interaction of buildings and vegetation with shortwave and longwave radiation, thermal emission, and radiation reflections. They contribute differently to the radiation budget of urban surfaces. Each process requires different computational resources and physical data for the urban elements. This study investigates how much detail modellers should include to parameterize radiative transfer in microscale building-resolving UCMs. To that end, we introduce a stepwise parameterization method to the Parallelized Large-eddy Simulation Model (PALM) system 6.0 to quantify individually the effects of the main radiative transfer processes on the radiation budget and on the flow field. We quantify numerical simulations of both simple and realistic urban configurations to identify the major and the minor effects of radiative transfer processes on the radiation budget. The study shows that processes such as surface and vegetation interaction with shortwave and longwave radiation will have major effects, while a process such as multiple reflections will have minor effects. The study also shows that radiative transfer processes within the canopy layer implicitly affect the incoming radiation since the radiative transfer model is coupled to the radiation model. The flow field changes considerably in response to the radiative transfer processes included in the model. The study identified those processes which are essentially needed to assure acceptable quality of the flow field. These processes are receiving radiation from atmosphere based on the sky-view factors, interaction of urban vegetation with radiation, radiative transfer among urban surfaces, and considering at least single reflection of radiation. Omitting any of these processes may lead to high uncertainties in the model results.