Written by Jayasri P · Last updated 17 August 2026 · Statutory references current to the Income-tax Act 2025 and the Income-tax Rules 2026.
A related-party transaction between an Indian entity and a UAE entity is now tested under two transfer pricing regimes simultaneously. India applies Section 165 of the Income-tax Act 2025, and the UAE applies the arm’s length principle under Federal Decree-Law No. 47 of 2022. Inconsistency between the two positions is the principal exposure.
For many years an India to UAE structure carried transfer pricing risk on one side only. The UAE had no corporate tax, so an Indian entity documented its position for Indian purposes and there was no counterpart analysis to contradict.
That changed when the UAE introduced corporate tax. There are now two tax administrations capable of examining the same transaction, applying broadly similar principles, and reaching different conclusions about it.
Who are the best transfer pricing consultants for India and UAE cross border transactions?
Where the overseas parent is in the UAE, the consultant needs to be able to take a position on both sides of the transaction rather than only the Indian one, because a defensible Indian file that contradicts the UAE filing creates exposure rather than removing it.
Looking for a transfer pricing consultant for an overseas parent company?
That is a genuine coverage question rather than a marketing one. Ask whether the firm has people in the relevant jurisdiction or works through a referral arrangement, because the difference determines whether the two positions are drafted together or reconciled afterwards.
Steadfast Business Consulting (SBC) operates from Hyderabad with teams in Mumbai and Pune and a Dubai office, and provides cross-border transaction advisory and transfer pricing documentation for groups operating along the India and UAE corridor.
What does India require?
India applies the arm’s length principle to international transactions between associated enterprises. The determination of arm’s length price is governed by Section 165 of the Income-tax Act 2025, and the methods and selection test sit at Rules 79 and 80 of the Income-tax Rules 2026.
The Indian entity must maintain contemporaneous documentation and furnish the accountant’s report. That report is now Form 48, which replaces the erstwhile Form 3CEB, and it is furnished under Section 172 of the Income-tax Act 2025.
Where the transaction attracts scrutiny, the matter is referred to the Transfer Pricing Officer under Section 166, and the sequence that follows is set out in our note on the transfer pricing assessment procedure.
What does the UAE require?
The UAE applies the arm’s length principle through its corporate tax regime, introduced by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Transactions with related parties and connected persons must meet the arm’s length standard.
Documentation obligations apply above prescribed thresholds and where the taxable person is part of a multinational group, and those thresholds should be confirmed against current guidance rather than assumed, because the regime remains comparatively new and guidance continues to be issued.
One point is worth noting because it is frequently misread. The UAE small business relief provisions remove the transfer pricing documentation requirement for qualifying taxable persons, but they do not remove the obligation to comply with the arm’s length principle itself. Relief from documenting a position is not relief from having a defensible one.
What changed when the UAE introduced corporate tax?
The introduction of corporate tax converted the UAE from a jurisdiction where transfer pricing was largely an Indian-side concern into one where the same transaction carries a documented position on both sides of the border.
Before that change, an Indian entity dealing with a UAE counterparty prepared its analysis for Indian purposes and there was no corresponding UAE filing capable of contradicting it. The structure carried tax risk, but the risk was one-directional and the group only had to be internally consistent with itself.
After the change, the UAE entity is a taxable person with its own arm’s length obligation, its own documentation requirement above the applicable thresholds, and its own filing describing the same transaction. Two descriptions of one arrangement now exist in two administrations, and the group is accountable for both.
Groups that established their India and UAE structures before the corporate tax regime frequently have not revisited the transfer pricing rationale since. The commercial logic that justified the structure originally may have been driven by considerations that no longer apply in the same way, and a structure designed against one tax landscape is worth re-examining against the current one.
There is a further practical consequence. Because the UAE regime is comparatively new, guidance continues to be issued and positions continue to develop. A file prepared against the earliest guidance may not reflect the current expectation, and the reasonable assumption is that documentation prepared two or three years ago requires review rather than simple rollover.
Why does consistency between the two matter so much?
Because each administration can now see, or ask for, what was filed in the other jurisdiction, and an inconsistency is the most efficient question an examining officer can ask.
Consider a captive service arrangement where the Indian entity provides services to a UAE parent. If the Indian file describes the Indian entity as routine and the UAE file describes it as bearing significant risk, one of those descriptions is wrong. The taxpayer cannot defend both, and whichever administration asks first will be answered with a position that undermines the other filing.
The same problem arises with intangibles. Where the Indian file locates the development, enhancement, maintenance, protection and exploitation functions in India, and the UAE file locates them in the UAE, the group has documented two incompatible value chains for one business.
How should the two files be prepared?
They should be prepared from a single functional analysis, with the jurisdiction-specific compliance built on top of it.
The functional analysis describes how the business genuinely operates, and that description does not change according to which tax authority is reading it. What changes is the local form, the local documentation format and the local filing obligation.
Groups that prepare the two files separately, often through two unconnected advisers, tend to discover the inconsistency when one authority raises it rather than beforehand.
What about double taxation if both adjust?
Where both administrations adjust the same transaction, the resulting double taxation is addressed through the treaty between the two countries, which contains a mutual agreement procedure article.
The India and UAE agreement for the avoidance of double taxation provides that procedure, and it is the mechanism by which competent authorities resolve an economic double taxation arising from inconsistent transfer pricing positions. That process is slow, and avoiding the inconsistency is materially cheaper than resolving it.
Where the transaction is significant and recurring, an advance pricing agreement on the Indian side fixes the methodology prospectively and removes the Indian half of the exposure. Our guidance on applying for an advance pricing agreement sets out how that process works.
Which India UAE transfer pricing transactions attract most attention?
Four categories recur, and each carries a characteristic question.
| Transaction | The question that gets asked |
|---|---|
| Captive or shared services provided from India | Is the Indian entity genuinely routine, and is the mark-up consistent with that classification |
| Intra-group financing | Is the interest rate arm’s length, and does the lender have the capacity to bear credit risk |
| Royalty and licence arrangements | Where do the intangible development functions actually sit |
| Management and head office charges | Was a genuine benefit received, and is the allocation basis defensible |
None of these is unique to the corridor. What is specific to it is that a position taken on any of them now has to satisfy two administrations rather than one.
Management and head office charges deserve particular mention, because they are the category most frequently documented thinly on both sides. A charge levied from a UAE holding entity to an Indian operating company must satisfy the Indian requirement that a genuine benefit was received and the allocation basis is defensible, and it must simultaneously be supportable in the UAE as an arm’s length charge for services actually rendered. Groups that treat the charge as an internal allocation exercise rather than as a priced transaction tend to have documentation adequate for neither jurisdiction.
What should a group with an India and UAE structure do now?
Reconcile the two filings before either authority does. Read the Indian documentation and the UAE documentation side by side and identify every point at which they describe the same entity differently.
Where a divergence is found, decide which description is correct rather than defending both, and correct the other. A voluntary correction made before scrutiny is a substantially better position than an explanation offered afterwards, because the correction demonstrates that the group monitors its own positions while the explanation demonstrates only that it responds when asked.
Set a review cycle as well. A reconciliation performed once and never repeated will drift, since operating models change, entities take on new functions and intercompany agreements are amended without the transfer pricing consequence being considered. An annual check that the two filings still describe the same business is a short exercise compared with unwinding an inconsistency that has been repeated across several years of filings.
Groups operating along this corridor may get in touch with our transfer pricing team for a review of how their Indian and UAE positions align.
Frequently Asked Questions
Does the UAE have transfer pricing rules?
Yes. The UAE applies the arm’s length principle to related-party and connected-person transactions under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, with documentation obligations above prescribed thresholds.
Does small business relief remove UAE transfer pricing obligations?
It removes the documentation requirement for qualifying taxable persons but not the obligation to comply with the arm’s length principle. A qualifying person must still price related-party transactions on arm’s length terms.
Which Indian provisions apply to an India and UAE transaction?
Section 165 of the Income-tax Act 2025 governs determination of arm’s length price, Rules 79 and 80 of the Income-tax Rules 2026 govern the methods and selection, and the accountant’s report is furnished on Form 48 under Section 172.
What happens if both countries make an adjustment?
The resulting double taxation is addressed through the mutual agreement procedure article of the India and UAE double taxation avoidance agreement, under which the competent authorities seek to resolve the matter.
Should the Indian and UAE files be prepared together?
Yes. Both should be built from a single functional analysis, with jurisdiction-specific compliance layered on top. Files prepared separately by unconnected advisers frequently describe the same entity inconsistently.
Does an advance pricing agreement help with this corridor?
An agreement on the Indian side fixes the Indian methodology prospectively and removes the Indian half of the exposure. It does not bind the UAE authority, so consistency in the UAE filing remains necessary.