The Impact of Corporate Tax UAE on Indian business decisions may be influenced by its implementation resulting in them seeking to establish or grow their presence in Dubai.
Nonetheless, the UAE’s 9% corporation tax rate is less than India’s corporate tax rate, which keeps the UAE and Dubai a desirable location for Indian enterprises. However, the AED 1,000,000 exemption threshold and the details of what counts as non-taxable activity will be very important in making these determinations.
Since free zones in the UAE have always been tax-free, the majority of Indian enterprises have established themselves there. Even in the mainland UAE, small businesses (with taxable income up to and including AED 375,000) are exempt from taxation. The new corporate tax law even offers a preferential 0% corporate tax rate on income from qualifying activities and transactions by a free zone entity. Businesses operating in the mainland UAE may be more affected by the 9% tax rate. Furthermore, since there is no withholding tax on cross-border payments, repairs made to Indian parent or headquarters businesses might not result in a higher tax burden.
“Taxation is an initiative for globalization of the business from Gulf countries,”stated Dr. Sahitya Chaturvedi, a chartered accountant and convener of the Indian Business and Professional Council’s Retail Focus group. “The UAE has introduced the lowest corporate income tax rate within the GCC region at a standard rate of 9%.” Dr. Chaturvedi goes on, “The UAECT regime has been designed to minimize the burden of compliance on businesses and incorporate best practices globally.”

Modifications of Corporate Tax UAE for Indian Companies
Indian companies doing business in the UAE would now have to abide by the documentation and transfer pricing guidelines. To comply with the requirements of the new Corporate tax regime in UAE, they would also need to evaluate the suitability of their current governance, operating model, and tax function. According to experts, these businesses should consider four factors while modifying their operations in light of the new tax laws.
- POEM, or the tax residency rule: If a foreign corporation is successfully “managed and controlled” in the UAE, it may be considered a resident person for UAE CT purposes.
- Transfer pricing provisions: Whether related parties are based in a free zone, abroad, or on the UAE mainland, transfer pricing regulations nevertheless apply to UAE businesses doing business with them.
- Substance requirements in Free Zones: In accordance with the type and extent of their activities and the qualifying money they generate, a qualified Free Zone person must possess and be able to demonstrate sufficient substance in a Free Zone. This implies that in order to carry out its primary revenue-generating activities in the Free Zone, the entity in question must have sufficient personnel, assets, and operating costs.
- Administrative and compliance requirements: The implementation of corporation tax will impose tax return, transfer pricing paperwork, and record-keeping demands on businesses.
In Summary
The UAE’s adoption of 9% business tax is a significant change in policy and a move in the direction of global tax transparency norms. With tax exemptions for important industries and lower rates for free zone corporations, the UAE maintains a competitive environment for both domestic and foreign investors, despite possible consequences for firms. Despite the new tax, the UAE is still a desirable place to do business because of its favorable environment, which is especially beneficial for Indian companies that may take advantage of the business-friendly environment while abiding by the new regulations.
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