Income from LLC in Dubai and its taxability in India

Income from LLC in Dubai and its taxability in India

Background
I am planning to expand my business in UAE and want to open LLC. I am an Resident Indian citizen since last many years and do not intend to shift to Dubai for my new venture. My current income in India is Salary income and income from other sources which totals to around 50 lacs as per my last ITR filings. I don't have any foreign assets as of now.

My question:
1. I am planning to open LLC in Dubai. What will the tax liability in my hands if that LLC hypothetically makes profit of say 5000 AED. Will I be taxed in India if even if this amount is not repatriated into India and re-invested into my business activities.? If yes what shall be the conversion rate at which I need to show this income and under what head do I need to show the same?

2. Incase I repatriate the said 5000AED into India, when will the tax liability incur, When I transfer the amount or when I had earned that amount.(Eg I had earned 5000AED in FY 2023-24 and transfer the same in FY 2024-25)

3.Is it advisable to open Pvt ltd company in Dubai instead of LLC. Does earning 5000AED in LLC and 5000AED in Pvt Ltd have different tax liability impact here in India in my hands?

4. I have one of my friend who is a director and has his own Pvt ltd Company here in India. Now he also wants to be part of my LLC or pvt Ltd venture in Dubai. Can that indian Pvt Ltd company invest in Dubai LLC or Dubai Pvt Ltd? What shall be tax liability for that company in above case 1 & 2.

Asked 12 months ago in Income Tax

Hello,

Taxability of UAE LLC would depend whether it is a pass through entity or an opaque corporate entity in UAE.

If it is a corporate entity then you need to pay tax in India only if you receive salary or dividend from such entity and not otherwise.

If you declare dividend, then tax needs to be paid at the time of declaration irrespective of when you received it in India.

As mentioned above if you are a shareholder and the entity is a corporate then tax liability would appear only when the corporate declare dividend.

Yes Pvt. ltd. co. can invest in Dubai co. but generally it is not advisable to do so due to some FEMA related issues hence it is advisable to invest in individual capacity.

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo

CA, Jaipur

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1. Under India Income tax Act, incidence of tax and scope of total income depends on the residential status of an entity in a relevant previous year. If the turnover of foreign Co. is less than Rs. 50 Cr in a financial year then its residential status would be treated as non-resident. Non-Resident is liable to pay tax on India income only.

2. In the hands of individual director/shareholder : It can be considered as income in the year of receipt (i.e. F.Y. 2024-25).

In the hands of Indian Co. : Income would be considered on accrual basis

4. Yes Indian Pvt.Ltd can invest in Dubai Co.

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora

CA, Delhi

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