• Tax in india for uae business

I have been Pvt Ltd Company in India for over a decade, and my brother & I are both directors. My 100% client are of Foreign from the USA, UK, AU, UAE. No Indian clients.

I am opening up a new company in Sharjah Free Zone, where only I am the Shareholder. This company has no relation or subsidiary with my Indian company.

I have some queries:

- Is it legal for an Indian Company Director to open another company in UAE and simultaneously be the Director of both companies?

- Is it better to get Investor VISA or Employment VISA in UAE. Which is more better for Tax saving in India? Should I take dividends or salary from my UAE company to may it TAX-free in India?

- If I get INR status and keep my Dubai earnings in my corporate or personal bank account, will that be taxable in India? 

- Can I ask only my new clients to pay in my UAE company, or can I also shift some of my existing clients with a new agreement to pay to my UAE company? Are there any restrictions from the Indian government that I cannot shift my current clients to my UAE company to save Tax?

- Can I invoice the services from my India company to my UAE company? Or do I need to quit as a shareholder in my Indian company? I ask this because some say you can do it as a related party. 

- OR form another Proprietor in my Wife's name and bill to my UAE company from her India Sole proprietorship firm? I need money in India to manage my operational cost & Employees' salaries who will be based in India.

- I have never been outside India. However, if I stay in UAE out of India for more than 183 days in this financial year, will I get the NRI status and won't need to pay Tax on the money I earn? Retain in UAE?

- After I get NRI status, can I transfer my UAE earning to India to my account? Will that be taxable?

- Some said that since I had never been outside, so I must be in India for less than 60 days instead of 183 days to get the NRI status. Is that true?

- How do I get the NRI status?

- Do I need to get a UAE Tax residency certificate to show in India during my IT filling?

- Do I need to disclose my UAE income in India though it will not be taxable?
Asked 12 months ago in Income Tax

Hi,

Please refer to replies in line below:

- Yes its absolutely legal to be the director of two or more companies at the same time. However, the status of director ( whole time director, Executive director, Non-executive director etc....) keeps on changing depending on your role in each company. For instance - One cannot be a whole time director in two companies at the same time as per Indian tax laws. However, this may differ in UAE basis their tax laws in place.

-Taxability of any income in India is solely determined by the residential status of the person in India. Both type of Visa would welcome different taxability patterns. If you are moving out of India, then both of them will offer good tax saving options as well. However, business incomes are often considered more attractive for tax saving in India as compared to employment income.

- Your Dubai earnings shall not be taxable in India if these conditions are satisfied:

A. Income should not be sourced or accrued in India
B. Your are Non resident In India for the period when such income is earned.

- You can absolutely shift your clients from current company to your new company. However, it will not completely become tax free as we will have to determine service PE applicability on the incomes of associated enterprises.

- You can always raise service invoices from Indian Company to UAE company. The rule is this, if you are a shareholder or director in both the companies, then such transactions are categorized under related party transaction because both the companies become associated.
If you are not common in both the companies, then it will be treated as simple service invoice raised to any other consumer.

- Yes you are right if you qualify to be NRI, then your Dubai sourced income shall not be taxable in India. you can either retain or bring to India as well without taxability provided FEMA compliances are taken care of.

- TRC is required by Indian tax authorities if the treaty benefit is claimed in the tax return. So that document is subjective to your ITR filing positions.

- You don't need to disclose unless you qualify as resident in India.

These are high level comments as per our understanding. However, we can share detailed advisory with you basis complete facts and situation.

Thanks
Damini
 

Damini Agarwal
CA, Bangalore
407 Answers
31 Consultations

5.0 on 5.0

Hi,

  • You can be director of any no of companies. There are no restrictions. However, make sure that you are not whole time director as person can be a whole time director only in 1 company. 
  • Dividends as well as salaries both would be taxable in India since you are resident of India. However, instead of dividends and salaries, you could draw professional fees against which you can opt for 50% of profits u/s 44ADA. But that depends on type of directorship you hold. Generally if your directorship is in nature of employment then you cannot get professional fees it has to be employment income. 
  • Your UAE earnings will be taxable in India if you are resident. Also you may need to check because of your residency in India, the UAE company would be considered as resident of India because its effectively managed from India. This condition does not apply to companies having turnover less than Rs. 50 Crores.
  • You can shift your new as well as existing clients to UAE company. However, one needs to determine as to whether the servicing of these clients from India essentially by you could give rise to service PE of UAE company in India essentially leading to Attribution of UAE companies income in India to be taxed at 40%
  • Sole proprietorship of your wife would still be an associated enterprise of UAE company. Any invoicing has to be at arm's length price. You need to get TP documentation and audit done.
  • If you stay outside India for more than 183 days, you would be non-resident. However recently Act has introduced concept of deemed residency whereby if you are not liable to tax in any country(You would not be taxable in UAE) and if your Indian sourced income exceeds Rs.15 Lakhs (which may also include the foreign business income being controlled from India) then irrespective of no of days of stay in India you would be deemed to be resident of India. In that case your UAE business if it's controlled from India then it would be taxed in India.For 15 Lakh all your Indian incomes would be considered Salary, business, interest and capital gains. 
  • TRC is required only when you are claiming some treaty relief like for example if you are earning income from India.
  • If you are Nonresident you need not disclose UAE income and company.
  • You would be counted as nonresident for entire year and not from September to March. So your entire income from April to March in UAE would not be included.
  • If you are resident of India your UAE earnings even if not repatriated to you may be taxable if UAE company is regarded as Indian resident because if its effectively managed from India. In case its nit falling within threshold of Rs. 50 Crore then yes unless you repatriate it would not be taxable. 

We can have a detailed consultation based on detailed discussion. 


Regards
Prerna

Prerna Peshori
CA, Pune
194 Answers
11 Consultations

5.0 on 5.0

Please find answers

- Is it legal for an Indian Company Director to open another company in UAE and simultaneously be the Director of both companies?

YES LEGALLY THERE IS NO ISSUE WITH IT

- Is it better to get Investor VISA or Employment VISA in UAE. Which is more better for Tax saving in India? Should I take dividends or salary from my UAE company to may it TAX-free in India?

INVESTOR VISA - ANYWAY AS FREE TRADE ZONE COMPANY ONER YOU WILL GET EMIRATES ID WHICH WILL WORK. NONE OF IT WILL HAVE ANY IMPLICATION ON YOUR TAXATION IN INDIA

- If I get INR status and keep my Dubai earnings in my corporate or personal bank account, will that be taxable in India?

IF YOU ARE NRI THAN YOUR INCOME RECEIVED IN DUBAI IS NOT TAXABLE BUT IF YOU ARE TRASNFERRING BACK TO INDIA THAN ANY INVESTMENT DONE OUT OF IT WILL BE TAXABLE, HOWEVER IT CAN BE BETTER STRUCTURED BASED ON FACTS AND FUTURE REQURIEMENTS

- Can I ask only my new clients to pay in my UAE company, or can I also shift some of my existing clients with a new agreement to pay to my UAE company? Are there any restrictions from the Indian government that I cannot shift my current clients to my UAE company to save Tax?

AS PER PLACE OF EFFECTIVE MANAGEMENT RULE EVEN IF YOU SET UP A COMPANY IN UAE IF YOUR MAJOR BUISNESS DECISIONS ARE TAKEN IN INDIA IT WILL BE SUBJECT TO TAX IN INDIA ONLY, KEEPING THIS IN MIND YOU CAN SHIFT YOUR CLIENTS AND INCOME TO UAE

- Can I invoice the services from my India company to my UAE company? Or do I need to quit as a shareholder in my Indian company? I ask this because some say you can do it as a related party.

YES BUT IT SHOULD BE AT ARMS LENGTH I.E. MARKET PREVILING RATE AND SHOULD BE SUPPORTED BY DOCUMENTS SINCE BOTH THE ASSOCIATE ENTERPRISE AND YOU ALSO NEED TO FILE TRANSFER PRICING REPORT HERE IN INDIA

- OR form another Proprietor in my Wife's name and bill to my UAE company from her India Sole proprietorship firm? I need money in India to manage my operational cost & Employees' salaries who will be based in India.

THAN AGAIN INCOME WILL BE TAXABLE IN INDIA WHICH IS NOT ADVISABLE STRUCTURE TO SAVE TAX

- I have never been outside India. However, if I stay in UAE out of India for more than 183 days in this financial year, will I get the NRI status and won't need to pay Tax on the money I earn? Retain in UAE?

EVEN IF YOU STAY FOR 183 DAYS IN UAE YOU WILL BE RESIDENT BUT NOT ORDINARY RESIDENT AND IN THAT CASE STILL YOUR GLOBAL INCOME WILL BE SUBJECT TO TAX IN INDIA SO THAT WILL NOT HELP UNLESS YOU FOLLOW THIS FOR ALL THE COMING YEARS THAN YOUR STATUS WILL BE NRI AFTER 2 FINANCIAL YEAR

- After I get NRI status, can I transfer my UAE earning to India to my account? Will that be taxable?

YES YOU CAN BUT AS SHARED TAXATION WILL BE ON FUTURE USE

- Some said that since I had never been outside, so I must be in India for less than 60 days instead of 183 days to get the NRI status. Is that true?

AS MENTIONED YOU WILL BE RESIDENT BUT NOT RODINARY RESIDENCE AND NOT NON RESIDENT

- How do I get the NRI status?

REPLIED

- Do I need to get a UAE Tax residency certificate to show in India during my IT filling?

YES TO AVOID DOUBLE TAXATION

- Do I need to disclose my UAE income in India though it will not be taxable?

YES IF YOU ARE RESIDENT

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
39 Consultations

5.0 on 5.0

SINCE DUBAI IS ALSO GOING TO HAVE INCOME TAX STARTING FROM 1ST JULY,23 YOU CAN STRUCTURE TO MAKE IS MORE TAX EFFECTIVE AND EASY MOVEMENT OF FUNDS WHERE YOUR PRESENT STRUCTURE WLL NOT HELP

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
39 Consultations

5.0 on 5.0

There are lot of questions it will be better if you book a consultation for better discussion.

 

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4271 Answers
97 Consultations

5.0 on 5.0

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