Free zone vs mainland
| Free zone company | Mainland company | |
|---|---|---|
| Ownership | 100% foreign | 100% foreign for most activities since June 2021; some strategic activities restricted |
| Where you can trade | Within the free zone and internationally; mainland trade usually through a distributor or separate licence | Anywhere in the UAE |
| Tax | 0% on qualifying income if a Qualifying Free Zone Person; 9% on the rest | 0% up to AED 375,000, then 9% |
Corporate tax
- 9% on taxable income above AED 375,000.
- A Qualifying Free Zone Person pays 0% on qualifying income — but if non-qualifying revenue exceeds the lower of 5% of revenue or AED 5 million, it loses that status for five years.
- Small Business Relief for revenue up to AED 3 million, extended to tax periods ending by 31 December 2029.
Ongoing rules
- Ultimate beneficial owners (25% ownership or control) must be recorded and filed with the registrar.
- The UAE’s separate economic substance regulations were abolished for financial years ending after 31 December 2022 — corporate tax rules now do that job.
- India–UAE treaty rates on dividends, interest and royalties: see our UAE page.
The India side
| Resident individual (founder) | Indian company | |
|---|---|---|
| Route | ODI within the Liberalised Remittance Scheme | ODI under the automatic route |
| Limit | USD 250,000 per financial year (all LRS remittances together) | Up to 400% of net worth; RBI approval above USD 1 billion in a year |
| What you can invest in | Only an operating foreign company, not in financial services, and — if you control it — one with no subsidiaries of its own | Operating companies and, with conditions, holding structures |
| Reporting | Form FC through your bank; Annual Performance Report by 31 December | Form FC; Annual Performance Report by 31 December |
| Tax side | 20% TCS on remittances above ₹10 lakh a year (creditable); disclose in Schedule FA | Transfer pricing on dealings with the subsidiary |
The biggest risk: a UAE licence, address and bank account don’t make a company UAE-resident if the real decisions are taken in India. Under the place-of-effective-management rules and the treaty tie-breaker, it can be taxed as an Indian company. Plan who decides what, and where.
Frequently asked questions
Can an Indian own 100% of a Dubai company?
Yes. Free zone companies allow 100% foreign ownership, and since June 2021 mainland companies can also be 100% foreign-owned for most activities.
What is the corporate tax rate in the UAE?
0% on taxable income up to AED 375,000 and 9% above that. A Qualifying Free Zone Person pays 0% on qualifying income.
Do UAE companies still need to meet economic substance regulations?
No. The UAE abolished its economic substance regulations for financial years ending after 31 December 2022.
Is a Dubai company run from India taxed in India?
It can be. If key management and commercial decisions are in substance made in India, India can treat the company as resident under the place of effective management rules.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.