There are a number of advantages of getting an organization setup in Dubai and one of the vital necessary advantages is the low tax charges. Infact, in some areas (specifically freezones) in Dubai – there may be No Tax and that’s the reason they’re additionally referred to as as Tax Havens. It is because of this primarily that I considered having a Firm setup in Dubai.
I’m additionally into on-line work whereby I earn by Ads and different Accounting & Tax Consultancy Companies the place my location is immaterial, I considered Firm Formation in Dubai as properly other than the Indian entity.
Most of my shoppers are in developed areas like US, Canada, Europe, Australia and so on and so they don’t thoughts paying me in any nation until the time their work is being executed correctly.
And as my shoppers are Alright to pay me in any nation, I considered firm formation in Dubai. As all freezones are utterly tax exempt whereas Tax is levied in firms working from Mainland, it was clear to me that I needed to go for a Freezone solely. (Refer: Complete List of all Freezones).
I presently obtain funds from overseas shoppers in my Dubai firm and from my Indian shoppers in my Indian entity. Infact, even my crypto-currency investments are held by the Dubai freezone firm whereby No Tax is levied on crypto forex investments as properly in freezone as in comparison with holding them in India whereby flat 30% Tax has been levied.
After organising my firm in Dubai, I realised that a number of Indian HNI’s have arrange their firm in Dubai and do world commerce through their Dubai firm. They do that not solely to avoid wasting taxes but in addition due to ease of doing enterprise. There are a number of restrictions on Indian firms which aren’t there on a Dubai firm and due to this fact a number of entreprenuers choose to have an organization setup in Dubai as properly other than their Indian entity.
Tax Charges in Freezone vs Mainland
The primary motive why a number of Indians (particularly on-line companies) go for Firm setup in Dubai is due to the tax charges.
Until a few years again, there was No Tax in any respect in the entire of UAE. Neither was there any Revenue Tax, nor was there any VAT/GST or some other type of tax.
Nonetheless, 9% Company Tax has been levied on the earnings above 3,75,000 UAE Dirhams (INR 75 Lakhs) of Mainland entities from June 2023. This tax is just levied on entities in Mainland and never on the entities in Freezone areas. (Refer: Corporate Taxation in UAE)
Aside from this 9% Company Tax, there may be additionally VAT which is levied on Gross sales executed within the UAE. The rate of VAT is 5% on most items. Nonetheless, that is relevant solely on Gross sales executed within the Gulf and never on gross sales executed the place the shoppers are based mostly outdoors of the Gulf space to international locations like US, Canada, Europe, Australia and so on.
As my shoppers are primarily positioned in developed international locations like US, Canada, Europe, Australia and so on, it made no sense for me to do Firm Formation within the Mainland area and pay these taxes. Due to this fact, I did Firm Formation in a Freezone and neither do I presently pay any Company Tax nor any VAT.
PS: It’s also necessary to notice right here that VAT isn’t exempt in all Freezones. There are 2 sorts of Freezones i.e. Designated Freezones and Non-Designated Free Zones. 5% VAT will get levied on a number of transactions in a Non-Designated Freezone and due to this fact it’s suggest to set-up an organization in a Designated Free Zone solely. There are round 20 Freezones that are thought of as Designated Freezones and all different freezones are thought of as Non-Designated Free Zones.
The largest blunder which many enterprise homeowners make as a consequence of lack of understanding is that the arrange an organization in a Non-Designated Zone and later reaslise that VAT will get levied on a number of transactions in a Non-Designated Zone. Shifting a freezone isn’t straightforward and due to this fact it’s extremely advisable to go for a Designated Free Zone solely. (List of all Designated Freezones)
How you can set-up a Firm in Dubai?
Organising an firm in a Dubai Freezone is an easy course of and you might be solely required to provide the title of the corporate which you propose to register together with Passports and photographs of the administrators. No different doc is required to be submitted for registering an organization in Dubai. Even a single individual can register an organization and also you dont want 2 individuals to register an organization.
As soon as the title is authorized, the Immigration and Entry Allow could be generated and this complete course of will take round 2-3 weeks.
Put up this, you’ll be required to personally go to UAE to get their well being test up executed. Put up the well being test up, the Emirates ID could be created and your VISA Standing modified from Vacationer Visa to Investor VISA.
On the premise of this, the checking account of the corporate will be opened in UAE. An individual can open a checking account in any financial institution and activate web banking (together with Debit & Credit score Card) and function the checking account from anyplace throughout the Globe with out staying in UAE.
It’s pertinent to notice right here that Well being Verify-up, Emirates ID and Financial institution Account can’t be opened in UAE with out visiting UAE and an individual could be required to go to UAE for doing this stuff.
I’ll personally enable you to Arrange your entity in Dubai from India
- Select the Finest Free-zone Space to your Entity
- Allow you to Save Tax
- In compliance with RBI & Tax Legal guidelines
Charges for Firm setup in Dubai
The Govt fees an Annual License Charges which is Rs. 5 lakhs (approx) for a 3 12 months license in a freezone. This charges principally covers the License Charges, Registration Charges, Investor Visa Charges, Workplace house in a Co-working house, License Price, Immigration charges and so on. There isn’t a different expense to be incurred as this charges is inclusive of all the things. If you have already got UAE VISA – the fee could be even decrease.
The license charges for forming an organization within the mainland is a bit greater and now Indians may also be the 100% proprietor of an entity in mainland as properly which earlier not the case was. It is smart to setup an organization in mainland provided that you intent to supply companies or promote merchandise to clients within the mainland.
Nonetheless, the drawback with mainland is the 9% Company Tax which will get levied and due to this fact all exporters choose to setup the corporate within the freezone. Mainland Corporations are useful provided that you intent to promote one thing within the Mainland like some Retail retailer or Restaurant and so on. For any person whose shoppers are primarily outdoors UAE, it is smart to be organising the corporate in a freezone.
The license charges varies from Freezone to freezone and a few freezones cost a lot greater charges. The charges quoted above is what I pay for my freezone entity and that is the most affordable freezone which I may discover which additionally allowed me to set-up my enterprise there.
Managing the Dubai Firm
Managing the entity is easy as there are not any compliances that are required to be executed in my freezone. I’m solely required to pay the renewal charges (approx Rs. 5 Lakhs for a 3 12 months license) which the freezone authorities assist me adjust to and other than that there are not any kinds to be furnished or Stability Sheets to be submitted. You solely have to have a great marketing consultant for firm setup and selecting the best entity construction and as soon as it’s set-up you dont want any marketing consultant that will help you handle the corporate.
Nonetheless, some freezones do require an entity to do sure compliances and put together Revenue & Loss A/c in addition to Stability Sheet which is required to be submitted with the freezone. It’s all the time higher to test with the freezone about these necessities earlier than organising an organization in any freezone.
A number of compliances are required to be executed in Mainland entities as each VAT and Company Tax is levied on Mainland entities however isn’t required to be executed for Freezone entities. It is because of this that many of the service in addition to Items exporters choose to setup an organization in a Dubai Freezone.
By means of netbanking, I’m simply capable of handle the funds as properly. The banks additionally permit us to operated Multi-currency accounts with none want of a compulsory conversion to the native forex. In brief – managing the entity may be very easy.
Infact earlier than organising an firm in Dubai, I did consider different tax havens as properly like Singapore, British Virgin Islands, Cayman Islands, Malta, Cyprus and so on however realized that managing entities in these areas is kind of tough and really expensive so I opted for incorporating a freezone entity in UAE. Organising an entity in a few of these international locations could also be cheaper however the annual compliance price is so excessive that it simply doesn’t make any sense to be incorporating an entity in these international locations.
As my VISA Standing has been modified to Investor VISA, I’m required to go to UAE as soon as in a 12 months to maintain the visa standing lively. My keep in UAE is immaterial and bodily presence for even a few hours in UAE solves the aim. And due to this fact, to maintain my Investor VISA lively, I simply journey to Dubai within the morning, benefit from the seashore through the day and are available again residence within the night.
I personally havent relocated to Dubai and have solely arrange an organization in Dubai whereas residing in India. Nonetheless, I’ve seen lots of people who’ve settled there itself.
Does Indian Govt levy Tax on Earnings earned by Indians in a Freezone?
Whether or not Indian Govt will levy tax on the Revenue earned by this Overseas Firm will rely on whether or not the Firm is being managed and managed from India or not. In easy phrases, it’ll rely on whether or not its Administrators are residing in India or residing outdoors India.
If Administrators are Residing outdoors India
If the Administrators of the Dubai Firm are residing outdoors India, then neither can the Indian Govt levy Tax on the Revenue of the Firm and nor can they levy Tax on the Revenue of the Administrators. In such a case, each the Firm in addition to its Administrators could be thought of as NRI.
If the Administrators are Residing in India
Case I: If the Administrators are residing in India and Turnover of the Dubai Firm is greater than Rs. 50 Crores
In such a case, the Firm could be deemed to be Resident in India and Indian Govt will levy Tax on each the Revenue of the Administrators in addition to the Revenue of the Firm.
Case II: If the Administrators are Residing in India and Turnover of the Dubai Firm is lower than Rs. 50 Crores
A Overseas Firm with turnover/gross receipts of lower than Rs. 50 Crores p.a. can’t be thought of to be a Resident in India (Round No. 8/2017 dated February 23, 2017)
Because the turnover of my Dubai firm is anticipated to be lower than Rs. 50 crores p.a., the Indian Govt considers the corporate a Non-Resident and due to this fact can’t levy any Revenue Tax or GST on this firm. The Indian Govt can’t levy any Revenue Tax or GST on the freezone entity although the freezone entity is being managed by me from India because the provisions of Part 6(3)(ii) don’t get relevant on this case.
In such a case, the Indian Govt levies Tax on the Revenue of the Administrators however not on the Revenue of the Overseas Firm.
Thus, if in case you have a checking account in Dubai or US or Portugal and so on. in your Particular person Capability, the revenue earned in that checking account could be taxable in India in case you are residing in India from Rs. 1 onwards. Nonetheless, for those who personal a Firm outdoors India, Indian Govt can’t levy Tax on Revenue of such firm which is registered outdoors India. And due to this fact, it isn’t beneficial that you simply open a checking account in your Particular person Title outdoors India and moderately open an organization outdoors India as in such a case the Indian Govt doesn’t have the ability to levy any tax.
In case you are pondering how I do know a lot about taxes, then let me intimate you that I’m a CA by Qualification and earn by this weblog by ads, e-book gross sales and by offering different companies digitally to shoppers in India in addition to outdoors India. (Refer: About Me)
Further compliances to be executed in India for the Dubai Firm
Further Compliances are additionally required to be executed in India if any Indian resident opens an organization in any nation outdoors India.The extra compliances to be executed are:-
- The shareholders of the Dubai firm are required to reveal of their ITR Type underneath Schedule FA in regards to the shares which they maintain within the Dubai Firm
- The shareholders of the Dubai firm are additionally required to adjust to RBI Norms. The Funding outdoors India can both be executed underneath the Liberalised Funding Scheme or the Abroad Direct Funding Scheme.
As extra compliance is required to be executed in India whereas incorporating an organization outdoors India, it’s advisable to arrange the corporate by a Chartered Accountant who understands each the Indian in addition to Dubai/ UAE Tax and Funding Guidelines and keep legally compliant from the beginning moderately than regretting later.
My Dubai Firm Formation Construction
I’ve registered a Restricted Legal responsibility Firm (LLC) in a freezone which is on the outskirts of Dubai. And as it’s a Freezone LLC, the phrases FZ-LLC are talked about on the finish of my firm title.
In freezones, even a single individual can create a LLC and the utmost no. of shareholders will be 50 (whereas the minimal is 1). So my LLC is 100% on my title with none companions and I invoice my overseas shoppers by the Dubai firm and invoice my Indian shoppers by the Indian entity. All my crypto investments are additionally through the Dubai firm.
I’ve structured my entity in such a fashion in order that I keep 100% legally compliant each in India in addition to UAE.
Put up my entity incorporation, I’ve helped so many Indian entrepreneurs arrange their firm in a UAE Freezone that I actually have turn into an skilled on this discipline and never solely assist individuals incorporate firm in Dubai but in addition assist them do all the mandatory compliance in Dubai in addition to in India. I’d have helped round 10,000 companies arrange firms in previous 10 years and after serving to so many entrepreneurs, I realised that everybody has his personal set of causes to arrange an organization in Dubai. Some individuals arrange firm in Dubai for Revenue Tax and TDS Advantages, some arrange for GST Advantages and others for ease of doing enterprise.
When you’ve got any queries concerning Firm setup in any Dubai Freezone and the compliances to be executed in India concerning the identical, be at liberty to succeed in out to me by the shape beneath and I’ll be completely happy to assist.