There are a number of advantages of getting an organization setup in Dubai and one of the crucial vital advantages is the low tax charges. Infact, in some areas (particularly 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 Providers the place my location is immaterial, I considered Firm Formation in Dubai as effectively aside from the Indian entity.
Most of my purchasers are in developed areas like US, Canada, Europe, Australia and so forth and so they don’t thoughts paying me in any nation until the time their work is being finished correctly.
And as my purchasers are Okay 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: Full Listing of all Freezones).
I presently obtain funds from international purchasers in my Dubai firm and from my Indian purchasers in my Indian entity. Infact, even my crypto-currency investments are held by the Dubai freezone firm whereby No Tax is levied on crypto foreign money investments as effectively 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 loads of Indian HNI’s have arrange their firm in Dubai and do world commerce by way of their Dubai firm. They do that not solely to avoid wasting taxes but additionally due to ease of doing enterprise. There are loads of restrictions on Indian firms which aren’t there on a Dubai firm and due to this fact loads of entreprenuers want to have an organization setup in Dubai as effectively aside from their Indian entity.
Tax Charges in Freezone vs Mainland
The primary purpose why loads 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: Company Taxation in UAE)
Aside from this 9% Company Tax, there may be additionally VAT which is levied on Gross sales finished within the UAE. The fee of VAT is 5% on most gadgets. Nonetheless, that is relevant solely on Gross sales finished within the Gulf and never on gross sales finished the place the purchasers are primarily based exterior of the Gulf space to nations like US, Canada, Europe, Australia and so forth.
As my purchasers are primarily situated in developed nations like US, Canada, Europe, Australia and so forth, 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 is usually vital to notice right here that VAT isn’t exempt in all Freezones. There are 2 forms of Freezones i.e. Designated Freezones and Non-Designated Free Zones. 5% VAT will get levied on loads 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 because of lack of awareness is that the arrange an organization in a Non-Designated Zone and later reaslise that VAT will get levied on loads 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. (Listing of all Designated Freezones)
How you can set-up a Firm in Dubai?
Establishing an firm in a Dubai Freezone is a straightforward course of and you’re solely required to offer 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 particular person can register an organization and also you dont want 2 individuals to register an organization.
As soon as the title is accredited, the Immigration and Entry Allow could be generated and this complete course of will take round 2-3 weeks.
Publish this, you’ll be required to personally go to UAE to get their well being test up finished. Publish the well being test up, the Emirates ID could be created and your VISA Standing modified from Vacationer Visa to Investor VISA.
On the idea of this, the checking account of the corporate might 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 Examine-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 aid you Arrange your entity in Dubai from India
- Select the Finest Free-zone Space on your Entity
- Show you how to Save Tax
- In compliance with RBI & Tax Legal guidelines
Charges for Firm setup in Dubai
The Govt costs an Annual License Charges which is Rs. 5 lakhs (approx) for a 3 yr 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 forth. There is no such thing as a different expense to be incurred as this charges is inclusive of every thing. 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 will also be the 100% proprietor of an entity in mainland as effectively which earlier not the case was. It is smart to setup an organization in mainland provided that you intent to offer providers or promote merchandise to prospects within the mainland.
Nonetheless, the drawback with mainland is the 9% Company Tax which will get levied and due to this fact all exporters want to setup the corporate within the freezone. Mainland Firms are useful provided that you intent to promote one thing within the Mainland like some Retail retailer or Restaurant and so forth. For any person whose purchasers are primarily exterior 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 straightforward as there aren’t any compliances that are required to be finished in my freezone. I’m solely required to pay the renewal charges (approx Rs. 5 Lakhs for a 3 yr license) which the freezone authorities assist me adjust to and aside from that there aren’t any kinds to be furnished or Steadiness Sheets to be submitted. You solely must have a very good marketing consultant for firm setup and choosing the proper entity construction and as soon as it’s set-up you dont want any marketing consultant that can assist 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 Steadiness 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 finished in Mainland entities as each VAT and Company Tax is levied on Mainland entities however isn’t required to be finished for Freezone entities. It is because of this that a lot of the service in addition to Items exporters want to setup an organization in a Dubai Freezone.
By means of netbanking, I’m simply in a position to handle the funds as effectively. The banks additionally enable us to operated Multi-currency accounts with none want of a compulsory conversion to the native foreign money. In brief – managing the entity could be very easy.
Infact earlier than organising an firm in Dubai, I did consider different tax havens as effectively like Singapore, British Virgin Islands, Cayman Islands, Malta, Cyprus and so forth 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. Establishing an entity in a few of these nations 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 nations.
As my VISA Standing has been modified to Investor VISA, I’m required to go to UAE as soon as in a yr 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 Income earned by Indians in a Freezone?
Whether or not Indian Govt will levy tax on the Revenue earned by this Overseas Firm will rely upon whether or not the Firm is being managed and managed from India or not. In easy phrases, it can rely upon whether or not its Administrators are residing in India or residing exterior India.
If Administrators are Residing exterior India
If the Administrators of the Dubai Firm are residing exterior 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 predicted to be lower than Rs. 50 crores p.a., the Indian Govt considers the corporate a Non-Resident and due to this fact can not levy any Revenue Tax or GST on this firm. The Indian Govt can not levy any Revenue Tax or GST on the freezone entity though 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, in case you have a checking account in Dubai or US or Portugal and so forth. in your Particular person Capability, the revenue earned in that checking account could be taxable in India if you’re residing in India from Rs. 1 onwards. Nonetheless, if you happen to personal a Firm exterior India, Indian Govt can not levy Tax on Revenue of such firm which is registered exterior India. And due to this fact, it’s not really helpful that you simply open a checking account in your Particular person Identify exterior India and reasonably open an organization exterior India as in such a case the Indian Govt doesn’t have the facility 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 commercials, e-book gross sales and by offering different providers digitally to purchasers in India in addition to exterior India. (Refer: About Me)
Extra compliances to be finished in India for the Dubai Firm
Extra Compliances are additionally required to be finished in India if any Indian resident opens an organization in any nation exterior India.The extra compliances to be finished are:-
- The shareholders of the Dubai firm are required to reveal of their ITR Kind underneath Schedule FA concerning 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 exterior India can both be finished underneath the Liberalised Funding Scheme or the Abroad Direct Funding Scheme.
As further compliance is required to be finished in India whereas incorporating an organization exterior 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 reasonably 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 particular person can create a LLC and the utmost no. of shareholders might be 50 (whereas the minimal is 1). So my LLC is 100% on my title with none companions and I invoice my international purchasers by the Dubai firm and invoice my Indian purchasers by the Indian entity. All my crypto investments are additionally by way of the Dubai firm.
I’ve structured my entity in such a way in order that I keep 100% legally compliant each in India in addition to UAE.
Publish my entity incorporation, I’ve helped so many Indian entrepreneurs arrange their firm in a UAE Freezone that I personally have grow to be an professional on this subject and never solely assist individuals incorporate firm in Dubai but additionally 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.
If in case you have any queries concerning Firm setup in any Dubai Freezone and the compliances to be finished in India concerning the identical, be at liberty to achieve out to me by the shape beneath and I’ll be joyful to assist.