UAE Company Incorporation

The UAE Federal Corporate Tax Law (Federal Decree-Law No. 47 of 2022) introduced a 9% corporate tax on taxable profits above AED 375,000. The tax applies to financial years beginning on or after 1 June 2023. Taxable profits up to AED 375,000 are taxed at 0%. A Qualifying Free Zone Person (QFZP) — a free zone entity meeting specific conditions — is taxed at 0% on qualifying income and 9% on non-qualifying income. QFZP status requires substance, a qualifying activity, and no election to be taxed at 9%.

UAE VAT at 5% (Federal Decree-Law No. 8 of 2017) applies to taxable supplies and imports. Mandatory registration: taxable turnover or taxable expenses exceed AED 375,000 in the preceding 12 months or are expected to exceed that in the next 30 days. Voluntary registration: threshold AED 187,500. UAE free zone to free zone B2B supplies of goods may be zero-rated under Designated Zone rules — the analysis is fact-specific.

Yes. An Indian company can hold shares in a UAE entity. The Indian company must comply with FEMA Overseas Direct Investment (ODI) rules — specifically, the ODI must be filed through the Authorised Dealer (AD) bank via the FIRMS portal before funds are remitted to the UAE. The amount is limited to 400% of the Indian company's net worth unless specifically approved by RBI. Additionally, the Indian company must file an Annual Performance Report (APR) by 31 December each year for its UAE subsidiary.

A Mainland company licensed by the DED can trade with any client anywhere in the UAE, bid for government contracts, and operate retail or physical service locations. A Free Zone company is incorporated within a specific free zone jurisdiction and can generally trade freely internationally and within the free zone, but direct commercial operations to UAE Mainland customers technically require either a local service agent, a distribution agreement, or a separate DED branch — depending on the activity. Since 2021, the rules have been partially relaxed for certain activities, but the default restriction on free zone entities trading directly in the UAE Mainland continues to apply for most regulated activities.

The UAE Economic Substance Regulations (Cabinet Resolution No. 57 of 2020 as amended) require UAE entities conducting certain 'Relevant Activities' to demonstrate adequate economic substance in the UAE. Relevant Activities include banking, insurance, investment fund management, lease-finance, shipping, holding company activity, intellectual property, distribution and service centre business, and headquartering. An entity conducting a Relevant Activity must have: adequate qualified full-time employees, premises, and expenditure in the UAE; core income-generating activities performed in the UAE; and senior management decisions made in the UAE. Failure: AED 50,000 fine for first year, AED 400,000 for subsequent years, and automatic exchange of information with the relevant foreign tax authority.

Bank account opening is the single most variable and often most frustrating step in UAE company setup. Timelines range from 3 weeks to 3 months depending on the bank, the completeness of documentation, the nature of the business, and the UBO profile. UAE banks have significantly intensified KYC requirements under AML regulations since 2021. A business plan that clearly explains the commercial rationale, source of funds, expected client and transaction profile, and beneficial ownership structure dramatically improves approval speed. We prepare the complete KYC package, including the business plan and UBO disclosure, as part of our setup engagement.

India and the UAE have a DTAA (Convention for Avoidance of Double Taxation, 1993, amended 2016) that determines which country has taxing rights on various income types flowing between the two countries. Broadly: dividends from UAE subsidiary to Indian parent are taxable in India at treaty rates; interest and royalty flows have prescribed rates; business profits are generally taxed only in the country of residence unless the entity has a Permanent Establishment (PE) in the other country. The DTAA provides relief from double taxation — but only if the structures and substance requirements are properly maintained.

Yes. Free zone companies are entitled to a quota of investor, partner, and employment visas depending on the free zone authority, the type of office (virtual, flexi-desk, or physical), and paid-up capital. A typical flexi-desk setup in DMCC or RAKEZ entitles the investor to 2–3 visas. Physical office space increases the quota proportionally. The investor visa (also called a partner visa) gives 2-year UAE residency, renewable. A UAE residence visa also enables a UAE bank account in personal name and an Emirates ID.

The Wage Protection System (WPS) is a UAE Ministry of Human Resources regulation requiring employers to pay all employees' wages electronically through a registered WPS-compatible bank or exchange house, by the last working day of the month. Every salary payment is uploaded to the MoHRE (Ministry of Human Resources and Emiratisation) portal. WPS applies to all mainland and free zone UAE entities with employees on UAE work permits. Failure to comply within 10 days of due date — Ministry fine of AED 1,000 per worker, plus escalating consequences for repeat default.

Under FEMA, a person who is resident outside India (residing in a place outside India for more than 182 days in a financial year) is classified as a Non-Resident Indian (NRI) and is governed by FEMA's NRI-specific rules for holding and dealing in Indian assets. NRI income repatriation rules, NRO/NRE account requirements, and tax treaty implications all change on change of resident status. The transition year — when you split time between India and the UAE — has complex implications for both FEMA resident status and Indian income tax residential status under section 6 of the Income Tax Act. These are not the same test.

Yes. Each free zone is designated for specific activities — DMCC for commodities and trade; JAFZA for logistics and warehousing; Dubai Internet City for technology companies; Healthcare City for healthcare; DIFC and ADGM for financial services. Operating an activity outside the permitted scope of the free zone requires either a separate licence or a different free zone. On the Mainland, most activities are now available to 100% foreign-owned entities since the 2021 CCL amendment, but a reserved list of activities (including certain professional services, oil and gas, and telecom) retains nationality requirements or minimum capital thresholds.

Annual mandatory obligations for a UAE entity include: UAE Corporate Tax return (annual, within 9 months of FY end); VAT returns (quarterly or monthly depending on registration type); trade licence renewal (annually, before expiry); WPS payroll monthly uploads; Ultimate Beneficial Owner register update (if ownership changes); economic substance report (if a Relevant Activity is conducted); and for Indian shareholders, Form APR with the Indian AD bank by 31 December. PNPC's Dubai-India team manages all of the above as part of the ongoing engagement.

It can be — but the structure requires careful design to be both effective and compliant. The UAE entity should have genuine commercial substance: it should be the contracting party with the international clients, receive the fees, and have a demonstrable basis for being the entity that earns the income. If the UAE entity is simply a conduit for India-based work, Indian transfer pricing rules and PE provisions may still attribute the income to India. Intercompany pricing between the Indian entity (providing services) and the UAE entity (contracting with clients) must be at arm's length and documented under both Indian transfer pricing rules and UAE CT law.