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There are many benefits of setting up a company in Dubai and one of the most important benefits is the low tax rate. In fact, some areas in Dubai (namely freezones) – have no tax and are therefore called tax havens. This is why I thought of incorporating a unit in Dubai.
Since I have made some investments in many cryptos and I am also doing online work in which I earn through advertisements, e-book sales and other online services where my location is unimportant, I have also opened an offshore unit in Dubai. Thought Indian unit.
Most of my clients are in developed regions like US, Canada, Europe, Australia etc and they don’t mind paying me in any country as long as their work is not done properly.
And since my clients are fine to pay me in any country, I thought of operating a unit in a tax haven in UAE. Since all freezones are completely tax free, whereas companies operating from the Mainland are taxed, it was clear to me that I only had to opt for a freezone and after extensive research, I opted for a freezer on the outskirts of Dubai. Chosen (see: List of Freezones in UAE,
I currently receive payments from overseas customers at my overseas Freezone unit and from my Indian customers at my Indian unit. In fact, even my crypto-currency investments are held by foreign freezone entity, with no tax levied on crypto currency investments as well as in freezone as compared to holding in India. Flat 30% tax levied.
After adding my entity in Dubai, I realized that a lot of Indian importers and exporters of goods have also set up their entities in Dubai and do global business through their Dubai entities.
Tax Rates in Freezone vs. Mainland
The main reason many Indians (especially online businesses) incorporate an entity in the UAE is because of the tax rates.
Till a few years ago, there was no tax in the entire UAE. There was no income tax, no VAT/GST or any other type of tax.
However, with effect from June 2023 a 9% corporate tax has been imposed on profits of Mainland entities exceeding 3,75,000 UAE Dirhams (INR 75 lakhs). This tax is levied only on entities in the mainland and not on entities in Freezone areas. (to quote: Corporate Taxation in UAE,
In addition there is a 9% corporate tax, VAT which is levied on sales made in UAE. VAT rate on most items is 5%, However, this only applies to sales made in the Gulf and not to sales where customers are located outside the Gulf region such as the US, Europe, etc.
Since my clients are mainly located in developed countries like US, Canada, Europe, Australia etc., it did not make sense for me to incorporate an entity in the Mainland area and pay these taxes. Therefore, I incorporated an entity in a FreeZone and neither do I currently pay any corporation tax nor any VAT.
How to set up a company in Dubai?
Setting up an entity in Dubai Freezone is a simple process and you only need to provide the name of the entity you wish to incorporate along with the passports and photographs of the directors. No other documents are required to be submitted. Even a single person can open a company and you do not need 2 persons to open a company.
Once the name is approved, the immigration and entry permit will be generated and the whole process will take approximately 2-3 weeks.
Next, you have to visit FreeZone in person to check on their health. After the health check, Emirates ID will be generated and your visa status will change from Tourist Visa to Investor Visa.
Based on this, the company’s bank account can be opened in UAE. A person can open a bank account in any bank and activate internet banking and operate a bank account from anywhere in the world without being in UAE.
It is worth noting here that health check-up, Emirates ID And a bank account cannot be opened in UAE without visiting UAE and a person would need to travel to UAE to do these things.
Also, opening a bank account in UAE is not a simple process unlike India in which bank accounts can be opened overnight. In India, we are used to seeing bankers running after us to open a bank account, but in UAE – you have to run after a banker to open a bank account. (quote: The banking struggles of UAE startups,
If you know someone in the bank or are going through a referral, this will help you expedite the bank account opening process.
Fees for setting up a company in Dubai
The government charges an annual license fee which is Rs. 6 lakhs (approx) for 3 years license in FreeZone. This fee basically covers registration fee, investor visa fee, office space in co-working space, license cost, immigration fee, etc.
The license fee for setting up a unit in the mainland is a bit high and now Indians can also 100% owner of a unit in the mainland Also what was not there before. Opening a unit in the mainland only makes sense if you intend to provide services or sell products to customers in the mainland.
However, with mainland the loss is 9% corporate tax which is levied and hence all exporters prefer to incorporate a unit in the Freezone.
The license fee varies from freezone to freezone and some freezones charge very high fees. The fee quoted above is what I pay for my FreeZone unit and it is the cheapest FreeZone I could find which allowed me to set up my business there and make crypto investments as well.
unit management
Managing the unit is simple as no compliance is required in my FreeZone. I only need to pay the license fee (approximately Rs.6 lakhs for 3 years license) which the Freezone officials help me to comply with and furthermore there is no need to submit any form or prepare balance sheet . Thus, they have no compliance cost that is for hiring a CA or some consultant for Freezone in which I have incorporated my entity. You only need a consultant for setting up the unit and selecting the right unit structure and once it is established you do not need any consultant to help you manage the company.
However, some FreeZones require an entity to perform certain compliances and prepare Profit and Loss Account as well as Balance Sheet which are required to be submitted with FreeZone. It is always better to check with the Freezone about these requirements before setting up a company in any Freezone.
Compliance needs to be done in mainland entities because both VAT and corporate tax are levied on mainland entities, but not required to do so for freezone entities. This is why most service as well as goods exporters incorporate a unit in a freezone in Dubai.
Through netbanking, I can also manage money easily. In short – the management of the institution is very simple.
Before actually setting up an entity in Dubai, I had evaluated other tax havens such as Singapore, British Virgin Islands, Cayman Islands, Malta, Cyprus, etc., but realized that managing entities in these regions were quite difficult and very expensive. So I opted to include it. A Freezone unit in the United Arab Emirates.
Since my visa status has been changed investor visa, I need to visit UAE once a year to keep the visa status active. My stay in UAE is insignificant and physical presence in UAE even for a few hours serves the purpose. And so, now all my interchange flights are through Dubai which ensures that my investor visa status remains active
I have not personally relocated to Dubai and have only set up an offshore unit in Dubai. However, I have seen many people who have settled there. The Delhi-Dubai return ticket is also not that expensive and costs around Rs. 18,000.
Does the Government of India levy tax on profits earned by Indians in Freezone?
Foreign company with turnover/gross receipts of less than Rs. 50 crore per annum cannot be considered as resident in India (Circular No. 8/2017 dated 23rd February, 2017,
Since the turnover of my UAE Freezone unit is expected to be less than Rs. 50 crores per annum, Government of India considers the company as non-resident and hence cannot impose any tax on this company. Government of India cannot levy tax on the frozen unit even if the frozen unit is controlled by me from India as the provisions of section 6(3)(ii) do not apply in this case.
If you are wondering how do I know so much about taxes, then let me tell you that I am a CA by qualification and provide advertisements, e-book sales and other services digitally to customers in India through this blog. I earn by doing outside India.
my entity structure
I have registered a Limited Liability Company (LLC) in a Freezone which is on the outskirts of Dubai. And since this is a Freezone LLC, the words FZ-LLC are mentioned at the end of my company name.
In FreeZone, a single person can form an LLC and the maximum number. The number of shareholders can be 50 (while the minimum is 1). So my LLC is 100% in my name without any partners and I bill my foreign customers through the Freezone entity and bill my Indian customers through the Indian entity. All my crypto investments are also through the Freezone entity.
Similarly, I spend overseas through the Freezone unit and Indian spend through the Indian unit. If I have to pay anything like hosting fee, advertising fee or any other charges to someone in US, I also pay through Freezone unit through netbanking. I avoid making such payments through Indian entity as the Indian government imposes many taxes like GST reverse charge, TDS on overseas payments etc. So I avoid sending money outside India from my Indian entity.
This is also one of the main reasons why I included a unit outside India in FreeZone. I wanted to be 100% legally compliant and by following this structure – I am 100% compliant both in India as well as UAE.
If you have any questions about a FreeZone unit or a Mainland unit, feel free to write and I’ll try to help to the best of my knowledge.
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