UAE business and tax implication in India

UAE business and tax implication in India

Some backgroun:
1. We are in process of forming private limited company entity in Dubai/UAE. All 3 are Indians with residency in India.
2. Planned business will have no Indian customers.
3. All directors are planning to reside and maintain Indian residency.
4, Company plans to use global contractors including Indian for getting work done. In near future, all contractors to be Indian.

Question:
1. what are tax implications for such company where all directors are Indian residents (no one shifting base to UAE)
2. What are tax implications to individual directors taxing salaries in India?
3. After April 01, 2026 one of director is shifting full time to UAE/Dubai with company obtained VISA

Asked 1 month ago in Income Tax

Tax Implications of UAE Company with Indian Resident Directors

1️⃣ For UAE Company

Risk of being taxed in India under POEM rules if management/control is from India.

Payments to Indian contractors require TDS deduction.

2️⃣ For Indian Resident Directors

Salary from UAE is fully taxable in India as global income.

3️⃣ If One Director Moves to UAE (After April 1, 2026)

If Non-Resident (NR) in India, UAE salary not taxable in India.

Helps reduce POEM risk for the company.

✅ Key Advice: Ensure UAE business decisions are truly made from UAE, maintain records, and limit India-based control.

For detailed, personalized advice, consider a phone consultancy. Hope you find the information helpful. You are free to contact me for further discussion. If you could spare two minutes of your time to write a review, it would be greatly appreciated and bring immense happiness to read it. Thank you. Shubham Goyal.

Shubham Goyal

CA, Delhi

415 Answers

11 Consultations

Talk to Shubham Goyal

Establishing a private limited company in Dubai, UAE, with all directors being Indian residents involves several tax considerations:

1. Tax Implications for the Company:

Corporate Residency and Management: If the company's effective management and control are exercised from India, it may be deemed an Indian resident for tax purposes, subjecting its global income to Indian taxation.

UAE Corporate Tax: The UAE has introduced a corporate tax regime, with certain exemptions for businesses operating within designated free zones, provided they comply with specific requirements.

2. Tax Implications for Individual Directors:

Global Income Taxation: As Indian residents, directors are taxed on their worldwide income, including salaries received from foreign entities.

Double Taxation Avoidance Agreement (DTAA): India and the UAE have a DTAA to prevent double taxation. Directors can claim credit for taxes paid in the UAE against their Indian tax liability, subject to DTAA provisions.

3. Implications When a Director Relocates to the UAE After April 1, 2026:

Residential Status: If a director resides in the UAE for 182 days or more in a financial year, they may attain non-resident status in India, altering their tax obligations.

UAE Tax Residency: The UAE offers tax residency certificates to individuals residing there, potentially exempting them from Indian taxation on foreign income, depending on their residential status.

Thanks
Damini

Damini Agarwal

CA, Bangalore

499 Answers

31 Consultations

Talk to Damini Agarwal

1. Incidence of taxable income and tax liability would depend on the residential status of the foreign company. If the place of effective management is in India then the residential status of a foreign co. is treated as resident in India. A person with residential status is liable to pay tax on the global income. A foreign Co. with turnover upto Rs 50cr in a financial year is treated as non-resident.

2. It depends on the residential status of the directors and the place of accrual/receipt of the salary income

3. His residential status will change from 01.04.2026

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora

CA, Delhi

5003 Answers

1133 Consultations

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