A lot of Indian entrepreneurs nowadays are opting for Dubai Company Formation due to the several benefits it offers, such as a tax-free regime, business-friendly reforms, etc. However, executing a business idea in Dubai requires a good plan of action and deep thought. So, before taking the big leap toward business setup in Dubai, Indian entrepreneurs check a few important things to carry out successful incorporation.
Types of Licenses Issued in the UAE
- Trade License
- Industrial Licenses
- Professional Licenses
7 Things to consider before Dubai Company Formation
Setting up a business in Dubai for Indian entrepreneurs can be a profitable idea. However, before getting into this process one should look into the below points –
1. Tax rates
The major reason people opt for business setup in Dubai is the privileged tax rates in the country. There was a time when UAE levied no taxes at all, be it income tax, VAT/GST, or any other form of tax. But the government is planning to restructure this slab by levying a 9% Corporate Tax on Mainland entities earning profits above 3,75,000 UAE Dirhams. While the Freezone companies are still exempted from this obligation.
Apart from the corporate tax, Mainland companies have to pay a 5% VAT. VAT is usually exempted with foreign countries if done from Freezone.
One important thing to note is that not all Freezones are exempted from VAT. There are certain Freezones that are classified as Designated Freezones and the remaining are considered as Non-Designated Free Zones. Companies established in the Non-Designated Freezones are subject to 5% VAT. Therefore, Indian entrepreneurs who are planning for Dubai company formation must go for a Designated Freezone to be relieved from such obligations.
The business consultants at Shuraa can help you with the list of Designated and Non-Designated Freezone for your convenience.
2. Documentation requirements
Business setup in Dubai Freezone is a simple and straightforward process. All you need to do is provide the preferred name of the company along with the Passports and photographs of the company directors. Apart from these, there is no further requirement for any other document. In fact, LLC company formation in Dubai can also be done by a single person.
Nevertheless, if it’s a subsidiary or a branch in Dubai, then the owner will have to present additional documents such as Company MOA, AOA, Board Resolution, Incorporation Certificate etc.
3. Time duration for setup
The whole process of Dubai company formation is quick and takes around 2-3 weeks only. Besides, the applicant can do this process remotely from anywhere across the world. Moreover, opening a digital bank account also doesn’t require the physical presence of the individual. However, to open an account in a physical bank with branches, the applicant would have to travel to UAE.
Once you establish a bank account in the UAE, you can then activate Internet Banking and operate from anywhere across the world without having to stay in UAE.
4. Company registration cost
The Dubai company formation cost varies from location to location. It includes the license fee and the cost of office space. For visas, additional charges would be applicable, depending on the number of visa applications.
The UAE company formation cost in the Mainland is comparatively higher than that in the Freezone. Therefore, it is only wise to choose Dubai Freezone for your business setup. Also, remember that the cost of a license varies from Freezone to Freezone. However, if you intend to sell products or services in the UAE market, then setting up a Mainland company would be the ideal choice.
Exporters and traders usually do not prefer Mainland company setup due to the disadvantage of the 9% Corporate Tax. Nevertheless, Mainland companies are beneficial for those who intend to sell something in the Mainland and the local market, such as Retail stores, Restaurants, etc.
On the other hand, if the potential clients are mainly based outside the UAE, then establishing a Freezone entity would make much more sense. However, the only drawback is that they cannot sell their products and services to retail customers located within UAE. Their clients can be International customers (retail and business) and registered businesses in the UAE.
Managing a company in the Freezone is quite simple as there are no compliances required to be accomplished. You only have to pay the renewal fees for the license. Apart from that, there are no financial statements to be submitted or additional forms to be furnished. You only need a good company formation expert to choose the right corporate structure for your entity and carry out the registration process.
However, there are certain free zones that compel companies to do certain compliances and prepare financial accounts to submit to the authorities. Similarly, several compliances are required in Mainland companies as well such as VAT and Corporate Tax which are non-essential in Freezones. And for this reason, Indian entrepreneurs can opt for the Freezone company setup in Dubai.
Additionally, business owners having a company in Dubai can easily manage the funds lying in the business bank account in UAE through net banking. They can also conduct cross-country transactions through net banking. In addition, Dubai banks also allow multi-currency account operations without the need of converting to local currency. This thus makes the management of the business in Dubai for Indian entrepreneurs easy and convenient.
6. Tax in India on Dubai company
Imposing taxes on the income of Dubai company depends on whether the company is managed from India or not. In simple words, it will entirely be subject to the residing location of the Company Directors.
For instance, if the Director is located outside India, then the Indian government cannot impose any taxes on the Income of the Company or the Director, and both of them would be considered NRI (Non-Resident Indians).
On the other hand, if the Director of the Dubai company is residing in India and the company’s turnover is more than Rs. 50 Crores, then the entity would be considered to be Resident in India, and therefore will be subject to taxes on both the income of the Director as well as Company.
In a different scenario, if the Dubai company’s turnover is less than Rs. 50 Crores and the Directors are residing in India, then the Indian government cannot levy any Income Tax or GST on the company, considering it to be a Non-Resident. However, the Directors would be still subject to the income tax imposed by the Indian government.
Additionally, the Indian government also levies taxes on bank accounts established outside India in Individual names.
7. Additional compliances
There are many additional compliances that every Indian resident owning a company in Dubai has to do –
- The shareholders or partners of the Dubai firm have to disclose their shareholding in the company while filling up their Indian ITR Form.
- In certain scenarios, the shareholders of the Dubai company have to intimate the RBI about their foreign entity. The Indian residents can consider the Liberalized Investment Scheme or the Overseas Direct Investment to invest outside India.
As Indian investors have to do various compliances while incorporating a company In Dubai, it is advisable to seek assistance from a business formation expert like UAE Expansion who is well-informed about the UAE tax and investment rules. Hence, it is better to stay cooperative from the beginning rather than be disappointed over later.
For any queries regarding Dubai Company formation, feel free to reach out to us.
Documents Required for Starting a Business in Dubai
You will have to provide the following documents for complete registration for setting up a company in Dubai.
- Shareholders information
- Passport and Visa of the shareholders
- Application form
- PDF of business plan
- Board resolution documents
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Identity proof of the shareholders