Are you an Indian entrepreneur looking to expand your business globally? Dubai might be the perfect destination for you. With its tax-friendly policies and strategic location, Dubai has become a hot spot for company formation. However, before you jump into the process, there are some crucial things you need to know. Let’s explore the seven key aspects Indians should check when considering Dubai company formation in 2024.
- Understanding Tax Rates: Freezone vs Mainland
One of the main reasons Indians choose Dubai for business is its attractive tax structure. Until recently, the UAE had no taxes at all. But things have changed a bit.
In June 2023, the UAE introduced a 9% corporate tax on profits above 375,000 UAE Dirhams (about 84 Lakhs Indian Rupees) for mainland companies. However, this tax doesn’t apply to companies in Freezones.
There’s also a 5% VAT (Value Added Tax) on most items sold by mainland companies within the UAE. But if you’re selling to customers outside the Gulf region, like in the US, Canada, or Europe, you don’t have to worry about this VAT.
Company formation experts in Dubai often recommend setting up in a Freezone to avoid these taxes. It’s especially good for businesses that mostly deal with international clients.
- Required Documents for Company Formation
Setting up a company in a Dubai Freezone is pretty straightforward. You’ll need:
- The name you want for your company
- Passports and photos of the directors
That’s it for the basics! You don’t need a local partner, and even one person can start a company.
If you’re opening a branch or subsidiary of an existing company, you might need a few more papers like your company’s Memorandum of Association (MoA) and Articles of Association (AoA).
- Time Needed for Company Setup
Setting up your company in Dubai isn’t a long process. It usually takes about 2-3 weeks. The best part? You can do most of it from anywhere in the world.
After your company is set up, you’ll need to visit Dubai for a few important steps:
- Getting your UAE Residence Visa
- Getting your Emirates ID
- Opening a bank account
Once you’ve done these things and your internet banking is set up, you can run your company from anywhere in the world.
- Costs of Company Registration
The cost of setting up your company in Dubai depends on where you choose to do it. In a Freezone, it’s usually around 2.4 Lakhs Indian Rupees per year. This covers your license, a virtual office space, visa, and other small charges.
Setting up in the mainland costs more. It makes sense to choose the mainland only if you want to sell directly to customers in the UAE.
Remember, mainland companies have to pay that 9% corporate tax we talked about earlier. That’s why most exporters prefer freezones.
The only downside of a Freezone company is that it can’t sell directly to individual customers in the UAE. But it can deal with international customers and registered UAE businesses.
- Managing Your Dubai Company
Running your Dubai company is pretty easy. You can manage your company’s bank account through internet banking, even for international transactions. Many banks offer multi-currency accounts, so you don’t always have to change money to the local currency.
Freezone companies don’t have to do much paperwork. But from June 2023, all companies need to register for Corporate Tax and file a yearly tax return. Even though freezone companies don’t pay taxes, they still need to do this.
It’s a good idea to consult with accounting experts in the UAE to help with these new rules. Company formation experts in Dubai can often recommend reliable accounting services.
- Indian Tax on Dubai Company Profits
Whether India will tax your Dubai company’s profits depends on where the company is controlled from. It’s all about where the directors live.
If the directors live outside India, neither the company nor the directors pay tax to India. They’re considered Non-Resident Indians (NRIs).
If the directors live in India, it gets a bit more complicated:
- For companies with turnover over 50 Crores Indian Rupees: India will tax both the company and the directors.
- For companies with turnover under 50 Crores Indian Rupees: India only taxes the directors, not the company.
This is why many people prefer to set up a company rather than just opening a foreign bank account. India can tax money in your personal foreign account from the first rupee, but it’s harder for them to tax a foreign company’s income.
- Additional Checks for Indians with Dubai Companies
If you’re living in India and setting up a company in Dubai, you need to do a few extra things:
- Tell the Indian government about your Dubai company shares in your Indian tax return.
- In some cases, you need to inform the Reserve Bank of India (RBI) about your Dubai company.
These rules can be tricky, so it’s smart to work with a Chartered Accountant who knows both Indian and UAE rules. Company formation experts in Dubai can often connect you with the right professionals to keep everything legal and smooth.
Final Thought
Starting a company in Dubai can be a great move for Indian entrepreneurs. It offers many benefits, from tax advantages to easy global trade. But it’s important to understand all the details before you start.
Remember to think about where you want to set up – Freezone or mainland. Consider the costs, the time it will take, and how it might affect your taxes in India. And don’t forget about the extra steps you need to take as an Indian citizen.
With the right planning and help from experts, you can set up your Dubai company and take your business to new heights. Just make sure to follow all the rules and keep everything above board. Contact Abatera Pro and talk to our company formation experts in Dubai to discuss your specific goals and requirements for new business setups across the UAE.
Markita Ames
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