1) Personal tax residency & consequences
India (Income-tax Act, 1961):
You’re resident in India if you stay ≥182 days in India in the year, or meet other day-count tests. For Indian citizens/PIOs with Indian income > ₹15 lakh, the 60-day test becomes 120 days. A special “deemed resident” rule may apply to Indian citizens with ₹15 lakh+ Indian income who are not liable to tax in any other country. Residency drives worldwide income taxation in India.
UAE:
UAE does not levy personal income tax on employment/investment income (subject to specific cases). For treaty purposes, UAE issues Tax Residency Certificates (TRC); tie-breaker tests (per treaty/OECD style) look at home, centre of vital interests, habitual abode, nationality.
Planning tip: If you’re shifting base to Dubai, align your day counts, ensure UAE TRC, and avoid being dual resident for the same year.
2) Corporate structuring routes India ↔ UAE
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Indian company sells into UAE (no entity in UAE)
Watch out for Permanent Establishment (PE) in UAE via fixed place or dependent agent; if no PE, business profits are taxed only in the resident country per treaty.
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UAE subsidiary of Indian parent
UAE introduced Federal Corporate Tax (CT): 9% on taxable profits for tax periods beginning on/after 1 June 2023. Free Zone entities can be Qualifying Free Zone Persons (QFZP) with 0% on “Qualifying Income” and 9% on non-qualifying income, subject to strict conditions and activity tests.
From 2025, the UAE applies a 15% Domestic Minimum Top-Up Tax (DMTT) for large MNEs (EUR 750m+ revenue) under the OECD Pillar Two rules.
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Branch vs. Subsidiary
A UAE branch of an Indian company is typically part of the same legal entity (profits may be taxed where the PE exists under the treaty). A subsidiary is separate—useful for ring-fencing UAE risks and accessing Free Zone incentives. (Treaty/PE principles apply.)
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Economic Substance Regulations (ESR)
UAE entities undertaking Relevant Activities (e.g., HQ, distribution, holding company, fund management, etc.) must meet substance tests and annual filings.
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POEM & GAAR back in India
If key strategic decisions of a foreign company are effectively made in India, India may treat it as resident (POEM)—small companies under INR 50 crore turnover are generally outside POEM guidelines, but facts matter. GAAR may apply to impermissible avoidance where the tax benefit ≥ ₹3 crore in a year.
3) UAE corporate tax—what to know (quick guide)
Rate: Standard 9% CT; 0% for QFZP on Qualifying Income; 9% on non-qualifying. No UAE WHT on outbound dividends/interest/royalties under domestic law. (Check treaty for source-state tax in India.
Free Zones: To retain 0%, meet substance, qualifying activities, and de minimis tests; avoid “excluded activities” and ensure arm’s-length pricing.
Pillar Two: 15% DMTT for in-scope MNEs from 2025.
VAT: UAE VAT 5% since 2018; register, file, and comply if making taxable supplies in UAE.
4) India–UAE DTAA: relief & rates (at a glance)
The India–UAE tax treaty allocates taxing rights and avoids double taxation. For business profits, source taxation generally requires a PE; for passive income (dividends/interest/royalties), treaty caps can apply if conditions are met and TRC + Form 10F etc. are in place.
Commonly cited treaty caps (subject to meeting conditions and any protocol changes): Dividends ~10%, Interest 5%/12.5% (depending on payer/terms), Royalties 10%. Always verify the latest treaty text/protocol before remittance.
5) Outbound payments from India to Dubai
Section 195 TDS applies to sums chargeable to tax in India paid to non-residents; apply DTAA rates where eligible (obtain TRC, Form 10F, no-PE declarations as needed).
Form 15CA/15CB workflow before remittance (thresholds & parts vary by amount and taxability). Recent user manuals detail the online process.
6) GST on exports of services to UAE
Export of services (supplier in India, recipient outside India, place of supply outside India, consideration in convertible FX/INR as permitted, parties not merely establishments of distinct person) = zero-rated under IGST. Export under LUT/Bond with refund of ITC, or pay IGST and claim refund.
7) FEMA & funding flows
LRS: Resident individuals can remit up to USD 250,000 per FY for permitted purposes. PAN is mandatory; TCS may apply per current Finance Act/TCS rules (banks publish operational TCS grids). Check your bank’s current TCS slab before transfers.
8) Transfer pricing & documentation
India TP applies to international and specified domestic transactions.
UAE CT law introduces OECD-aligned TP with Master/Local File expectations (for in-scope taxpayers) and arm’s-length rules—especially critical for Free Zone relief.
9) Quick compliance checklists
For individuals moving to Dubai
Track day counts (India & UAE), ensure UAE TRC; close or convert Indian Resident bank accounts appropriately; evaluate RNOR window; map Indian TDS/advance tax if still resident; plan capital gains timing.
For Indian businesses selling to UAE without entity
Assess PE risk (site/office/agent); maintain no-PE evidence; apply DTAA on inbound UAE receipts; manage Section 195 & 15CA/CB on outbound payments.
For UAE subsidiaries/free-zone companies
Validate QFZP status and Qualifying Activities; keep economic substance; prepare TP documentation; monitor Pillar Two exposure if MNE; comply with VAT 5% registrations/returns.
10) Common pitfalls (and how to avoid them)
- Dual residency in a transition year → Use tie-breaker analysis and documentation.
- Losing Free Zone 0% by conducting excluded activities or failing related-party pricing tests.
- POEM risk by running overseas company from India → document where key management decisions happen.
- Skipping 15CA/CB or wrong treaty rate → follow latest e-filing manuals and maintain TRC/Form 10F.
- Ignoring Pillar Two for large groups → model DMTT exposure early.
11) At-a-glance resource pack (authoritative)
UAE Corporate Tax overview (official portal).
UAE CT Decree-Law No.47 of 2022 (rates, QFZP).
FTA: Free Zone Persons—Guidance (May 2024).
UAE VAT 5% (official).
India–UAE DTAA texts/portal.
Indian residency & deemed residency notes.
POEM & GAAR references (CBDT guidance/thresholds).
RBI LRS FAQs (USD 250,000 limit).
15CA/CB user manuals (Income-tax e-filing).
12) Illustrative scenarios
Scenario A: Indian consultant billing a UAE client
Qualify as export of services → zero-rated under IGST; no GST charged; claim ITC refund. In India, income is business/professional; in UAE, no personal tax. Ensure no PE in UAE.
Scenario B: Free Zone trading company in Dubai with India parent
If QFZP conditions met and income is Qualifying, 0% CT on those profits; 9% on non-qualifying. Maintain ESR and TP. Dividends up to India subject to Indian rules; use DTAA for any cross-border payments.
Scenario C: Large MNE setting up a UAE hub
Model Pillar Two 15% DMTT from 2025; don’t rely solely on 0%/9% headline rates—effective tax may step up to 15% for in-scope groups.