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 for that reason primarily that I considered having a Firm setup in Dubai.
I’m additionally into on-line work whereby I earn by means of Ads and different Accounting & Tax Consultancy Companies the place my location is immaterial, I considered Firm Formation in Dubai as nicely aside from 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 completed 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: Full Checklist of all Freezones).
I at the moment obtain funds from international 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 foreign money investments as nicely in freezone as in comparison with holding them in India whereby flat 30% Tax has been levied.
After establishing my firm in Dubai, I realised that plenty of Indian HNI’s have arrange their firm in Dubai and do world commerce through their Dubai firm. They do that not solely to save lots of taxes but in addition due to ease of doing enterprise. There are plenty of restrictions on Indian firms which aren’t there on a Dubai firm and subsequently plenty of entreprenuers desire to have an organization setup in Dubai as nicely aside from their Indian entity.
Tax Charges in Freezone vs Mainland
The principle motive why plenty 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 another type of tax.
Nonetheless, 9% Company Tax has been levied on the income above 3,75,000 UAE Dirhams (INR 75 Lakhs) of Mainland entities from June 2023. This tax is simply 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 completed within the UAE. The fee of VAT is 5% on most objects. Nonetheless, that is relevant solely on Gross sales completed within the Gulf and never on gross sales completed the place the shoppers are primarily based exterior of the Gulf space to international locations like US, Canada, Europe, Australia and so on.
As my shoppers are primarily situated 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. Subsequently, I did Firm Formation in a Freezone and neither do I at the moment pay any Company Tax nor any VAT.
PS: It is usually necessary to notice right here that VAT shouldn’t be exempt in all Freezones. There are 2 kinds of Freezones i.e. Designated Freezones and Non-Designated Free Zones. 5% VAT will get levied on plenty of transactions in a Non-Designated Freezone and subsequently it’s advocate 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 most important blunder which many enterprise house owners make resulting from lack of awareness is that the arrange an organization in a Non-Designated Zone and later reaslise that VAT will get levied on plenty of transactions in a Non-Designated Zone. Shifting a freezone shouldn’t be simple and subsequently it’s extremely advisable to go for a Designated Free Zone solely. (Checklist of all Designated Freezones)
Learn how to set-up a Firm in Dubai?
Organising an firm in a Dubai Freezone is a straightforward course of and you might be solely required to provide the identify 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 identify is authorised, the Immigration and Entry Allow could be generated and this complete course of will take round 2-3 weeks.
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 Test-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 these items.
I’ll personally make it easier to 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. 5.5 lakhs (approx) for a 3 12 months license in a freezone. This charges mainly covers the License Charges, Registration Charges, Investor Visa Charges, Workplace house in a Co-working house, License Value, Immigration charges and so on. There isn’t any 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 increased and now Indians can be the 100% proprietor of an entity in mainland as nicely which earlier not the case was. It is sensible to setup an organization in mainland provided that you intent to supply providers or promote merchandise to clients within the mainland.
Nonetheless, the drawback with mainland is the 9% Company Tax which will get levied and subsequently all exporters desire 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 individual whose shoppers are primarily exterior UAE, it is sensible to be establishing the corporate in a freezone.
The license charges varies from Freezone to freezone and a few freezones cost a lot increased 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 completed in my freezone. I’m solely required to pay the renewal charges (approx Rs. 5.5 Lakhs for a 3 12 months license) which the freezone authorities assist me adjust to and aside from that there aren’t any types to be furnished or Steadiness Sheets to be submitted. You solely have to have a great advisor for firm setup and selecting the best entity construction and as soon as it’s set-up you dont want any advisor 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 establishing an organization in any freezone.
A number of compliances are required to be completed in Mainland entities as each VAT and Company Tax is levied on Mainland entities however shouldn’t be required to be completed for Freezone entities. It is for that reason that many of the service in addition to Items exporters desire to setup an organization in a Dubai Freezone.
By way of netbanking, I’m simply in a position to handle the funds as nicely. The banks additionally permit us to operated Multi-currency accounts with none want of a compulsory conversion to the native foreign money. Briefly – managing the entity could be very easy.
Infact earlier than establishing an firm in Dubai, I did consider different tax havens as nicely 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 value 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 subsequently, 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 house within the night. (People with Worker/Work VISA are required to go to UAE as soon as in 6 months however People with Investor VISA have the comfort of visiting as soon as in a 12 months)
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 International Firm will depend upon whether or not the Firm is being managed and managed from India or not. In easy phrases, it’ll depend 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 International 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 subsequently 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 regardless that 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 International 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 earnings earned in that checking account could be taxable in India in case you are residing in India from Rs. 1 onwards. Nonetheless, in the event you personal a Firm exterior India, Indian Govt can not levy Tax on Revenue of such firm which is registered exterior India. And subsequently, it’s not really useful that you just open a checking account in your Particular person Title exterior India and slightly open an organization exterior India as in such a case the Indian Govt doesn’t have the ability to levy any tax.
In case you are considering how I do know a lot about taxes, then let me intimate you that I’m a CA by Qualification and earn by means of this weblog by means of commercials, e-book gross sales and by offering different providers digitally to shoppers in India in addition to exterior India.