UAE Corporate Tax for Indian Businesses: What Changes When the Owner Is in India

A UAE company owned by an Indian business or an Indian founder pays UAE corporate tax at 0% on the first AED 375,000 of taxable income and 9% above that, unless it qualifies for the 0% free-zone regime. That is only half the picture. The same structure is also exposed to Indian tax through residence rules, transfer pricing and tax on dividends. Planning for one country without the other is how most India-UAE structures go wrong.

Who has to register

Every UAE juridical person, mainland or free zone, must register with the Federal Tax Authority, including companies that expect to pay 0%. A free-zone company still files a return each year. The registration deadline depends on the date of incorporation or licence, and missing it costs AED 10,000. An Indian company with a branch or a permanent establishment in the UAE registers as a non-resident person.

Mainland or free zone

A mainland company is taxed at 9% on its worldwide taxable income above the threshold, and can trade freely across the UAE. A free-zone company can keep 0% on qualifying income if it is a Qualifying Free Zone Person. That requires adequate substance in the zone, qualifying income only, audited financial statements, transfer pricing compliance, and non-qualifying revenue within the lower of 5% of total revenue or AED 5 million. Failing any condition means 9% on everything for that year and the next four. The conditions are set out in detail in our guide to the Qualifying Free Zone Person, and the mainland comparison is in free zone vs mainland.

For Indian groups the usual trap is income from the Indian parent. Services to a related party outside the free zones are not automatically qualifying income, and distribution of goods qualifies only when it is done from a designated zone. A company set up to invoice the Indian group may find that most of its revenue is taxed at 9%.

Small Business Relief

A resident person with revenue of AED 3 million or less in the current and all previous tax periods can elect to be treated as having no taxable income. The relief is available for tax periods ending on or before 31 December 2026 under Ministerial Decision 73 of 2023. It is not available to a Qualifying Free Zone Person or to members of large multinational groups, and losses cannot be carried forward from a year in which it is claimed. Unless it is extended, companies with a calendar year end lose it from 2027, so budgets for that year should assume 9%.

Transfer pricing with the Indian group

Transactions between the UAE company and its Indian parent, sister companies or shareholders must be at arm’s length under both UAE and Indian law. On the UAE side, a disclosure form is filed with the return once related-party transactions cross the prescribed value, and a master file and local file are required where the company’s revenue is AED 200 million or more or the group’s is AED 3.15 billion or more. All Qualifying Free Zone Persons must keep transfer pricing documentation regardless of size. On the Indian side, the parent reports the same transactions in its accountant’s report and its own documentation. The two files should tell the same story. See our UAE transfer pricing and India transfer pricing services.

The Indian side of the structure

• Residence. If the UAE company is effectively managed from India, India can tax its worldwide income. See POEM risk for a Dubai company owned by Indian residents.
• Dividends. The UAE does not levy withholding tax on dividends, but the Indian shareholder pays Indian tax on them. An individual pays at slab rates. There is no credit for the 9% corporate tax paid by the UAE company.
• Payments from India. Fees, royalties and interest paid by the Indian group to the UAE company are subject to Indian withholding under section 393(2), at treaty rates only if the UAE company has a valid tax residency certificate and is the beneficial owner. See India-UAE DTAA withholding rates.
• FEMA. The investment must be reported as overseas direct investment. See ODI vs LRS.
• Disclosure. Indian resident shareholders and signatories report the UAE shares and bank accounts in the foreign assets schedule of their Indian return.

A first-year compliance calendar

1. Register for corporate tax within the deadline for your licence date.
2. Decide the financial year and open books under IFRS from day one.
3. Assess VAT registration once taxable supplies approach AED 375,000.
4. Document intercompany pricing before the first invoice, not at year end.
5. File the Ultimate Beneficial Owner register with the licensing authority.
6. Appoint an auditor if you are in a free zone claiming 0%, or if revenue exceeds AED 50 million.
7. File the corporate tax return and pay within 9 months of year end.
8. In India, file the Annual Performance Report by 31 December and make the foreign asset disclosures in the return.

Our UAE corporate tax team handles registration, the free-zone analysis and filing, alongside the Indian reporting for the same structure.

Calculator: estimate the liability with our UAE corporate tax calculator.

Written by Vijay Dhawan, Managing Partner, LexVerge LLP. This article is general information, not tax or legal advice. Rates, thresholds and form numbers change; confirm the current position for your facts before acting.