Until 2023, transfer pricing between an Indian company and its Dubai affiliate was a one-sided exercise: India cared, the UAE did not. The UAE Corporate Tax Law changed that. Every intra-group transaction now has to satisfy the arm's length standard under two regimes, be disclosed to two authorities, and produce a result that both accept. A price that India adjusts upwards is not automatically adjusted downwards in the UAE, so the cost of getting it wrong is double taxation with no automatic relief.
Quick answer
- Two regimes, two authorities: Since the UAE Corporate Tax Law, India–UAE intra-group transactions must satisfy the arm's length standard under two regimes and, above the thresholds, be disclosed to two authorities.
- Same-family companies caught: A Mumbai company and a Dubai company controlled by the same family are usually caught under both transfer pricing regimes, because family holdings are counted together.
- One study for both: One benchmarking study can serve both India and the UAE, provided it is written with both in mind.
- Document before the year: The better protection against double taxation is a written intercompany agreement, a benchmarking study and invoices that follow it, prepared before the year begins.
Who is caught
India applies transfer pricing to international transactions between associated enterprises — direct or indirect holding of 26% or more, common control, dependence on loans, guarantees, licences or purchases, and similar tests — and to specified domestic transactions. The UAE applies the arm's length principle to transactions with related parties (50% ownership or control, and family relationships to the fourth degree) and connected persons (owners, directors and their relatives). A Mumbai company and a Dubai company controlled by the same family are usually caught under both, because family holdings are counted together.
The Indian requirements
| Requirement | Detail |
|---|---|
| Arm's length price | Determined by the most appropriate of CUP, resale price, cost plus, profit split or TNMM; a tolerance range of 1% (3% for other cases) around the arm's length price |
| Documentation | Contemporaneous documentation under Rule 10D where aggregate international transactions exceed ₹1 crore; kept for eight years |
| Accountant's report | Form 3CEB certified by a chartered accountant and filed by 31 October; the return is then due by 30 November |
| Master file | Form 3CEAA where the group's consolidated revenue exceeds ₹500 crore and international transactions exceed thresholds; Part A for all constituent entities |
| Country-by-country report | Groups with consolidated revenue above ₹6,400 crore |
| Penalties | 2% of transaction value for failing to keep or furnish documentation (271AA); ₹1 lakh for not filing 3CEB (271BA); under-reporting penalties on adjustments |
| Secondary adjustment | Where a primary adjustment exceeds ₹1 crore, the excess must be repatriated to India within 90 days or deemed interest accrues |
The UAE requirements
The UAE company must apply the arm's length principle to all related-party and connected-person transactions, file a transfer pricing disclosure form with its corporate tax return where related-party transactions exceed the threshold set by the FTA (aggregate transactions above AED 40 million, with each category above AED 4 million itemised; a separate connected-person schedule applies where transactions with any one connected person exceed AED 500,000), and maintain a master file and local file where its revenue is AED 200 million or more or it is part of a group with consolidated revenue of AED 3.15 billion or more. Payments to connected persons — a director's salary, a shareholder's consultancy fee — are deductible only to the extent they are at market value. A free zone company must comply with transfer pricing in full to keep its qualifying status, regardless of thresholds. The FTA's transfer pricing guide broadly follows the OECD Guidelines, as India's rules do in practice, so one benchmarking study can be written to serve both — provided it is written with both in mind.
The typical transactions and where they go wrong
- Export of goods from India to the UAE affiliate for resale. India examines the margin left in the UAE against comparable distributors; a UAE margin of 25% on a low-risk distributor is the standard adjustment. The UAE, conversely, may question a margin that is too low.
- Services from India to the UAE (back office, development, design). Cost plus 10–20% with proper cost allocation is common and defensible where a benchmarking study supports it (India's safe harbour rates for IT-enabled services are a useful check); charging at cost, or not charging at all, is not.
- Management fees from the UAE to India. Deductible in India only if the services are real, documented and benefit the Indian company; withholding under section 195 and GST under reverse charge apply.
- Loans and guarantees. Interest must be at arm's length in both countries; the UAE also limits interest deductions to 30% of EBITDA above a threshold, and India applies section 177 (94B of the 1961 Act) similarly.
- Use of the group's brand or software. A royalty is expected where value is transferred; the UAE's qualifying-IP rules and India's 20% withholding both apply.
When the two authorities disagree
If India adjusts the Indian company's income upwards, the UAE affiliate has paid tax on the same profit. The India–UAE treaty's mutual agreement procedure allows the taxpayer to ask the two authorities to resolve the double taxation; the UAE Corporate Tax Law also permits a corresponding adjustment where a foreign authority's adjustment is accepted. Both are slow. The better protection is documentation prepared before the year begins — a written intercompany agreement, a benchmarking study, and invoices that follow it — and, for larger groups, an advance pricing agreement in India.
Questions we are asked
When is Form 3CEB due for transactions between an Indian company and its UAE affiliate? 31 October. Form 3CEB is certified by a chartered accountant and filed by 31 October, and the income tax return is then due by 30 November.
When does a UAE company have to file a transfer pricing disclosure form? When aggregate related-party transactions in the tax period exceed AED 40 million, with each category above AED 4 million itemised; a separate connected-person schedule applies where transactions with any one connected person exceed AED 500,000. The disclosure form is filed with the corporate tax return.
What markup is acceptable for services from an Indian company to its UAE affiliate? It depends on a benchmarking study, but cost plus 10–20% with proper cost allocation is common for back office, development or design services from India to the UAE, checked against India's safe harbour rates for IT-enabled services; charging at cost, or not charging at all, is not defensible.
What happens if India makes a transfer pricing adjustment on an India–UAE transaction? Double taxation can result, with no automatic relief. The taxpayer can use the India–UAE treaty's mutual agreement procedure, and the UAE Corporate Tax Law permits a corresponding adjustment where a foreign authority's adjustment is accepted; both are slow.
One study, both countries
We prepare the intercompany agreements, the benchmarking and the documentation to meet Indian Rule 10D and the UAE local file standard together, and file Form 3CEB and the UAE disclosure form on time. Transfer pricing services or contact us.
Disclaimer
This note is for general information and knowledge purposes only. It describes the position as at 4 November 2026 and is not legal, tax or professional advice. Tax law changes frequently; please confirm the current position with us before acting.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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