Offshore Company Formation in Dubai For Indian Citizens

Located at the crossroads of prominent international markets in Asia, Europe, and Africa, as well as major domestic markets in the UAE, Dubai has evolved as a global trade hub. Its business-friendly policies, innovative technologies, and world-class infrastructure attract investors worldwide. 

Offshore Company formation in Dubai is a profitable investment choice for Indian entrepreneurs and investors who wish to elevate their businesses overseas. However, there are certain things that you must be acquainted with to establish an offshore company in the city. This blog will present a detailed explanation of the offshore company formation in the city of skyscrapers.

Let’s start with understanding what is the meaning of Dubai Offshore Company Formation.

What Does Dubai’s Offshore Company Formation Mean?

An offshore company is a legitimate business organization that is registered in the UAE but operates outside the nation. A time period of 7 to 14 working days is required for Dubai offshore company formation. The minimum fee for company registration is AED 18,000, which can vary depending on various factors like choice of jurisdiction, business activities, etc. 

What are the Benefits of Offshore Company Formation in Dubai? 

Offshore company formation in Dubai offers several benefits to Indian entrepreneurs and investors, which include: 

1. Tax Benefits: Offshore companies enjoy great tax benefits, as they don’t have to pay corporate, personal, property, or sales tax for operating business in Dubai, UAE. 

2. Confidentiality: They don’t need to maintain or publish their financial records or shareholders’ details, which helps businesses keep their dealings private.

3. Asset Protection: Offshore companies are separate business entities that operate in jurisdictions like Jebel Ali Offshore Company Zone, with strong asset protection laws. These laws reduce the risks of potential lawsuits or creditor claims, protecting the personal assets of business owners.

4. Easy Setup: The process of offshore company formation in Dubai is easy and quick as compared to freezone and mainland company formation. 

5. Low Cost: Among the available jurisdictions for company setup in Dubai, it requires the least initial investment. 

6. 100% Foreign Ownership: Indian entrepreneurs and investors don’t need a UAE national sponsor to obtain full foreign ownership of their offshore company in Dubai.

Tax Issues While Establishing an Offshore Business for Indians: 

Indian investors and entrepreneurs invest in offshore company formation in Dubai to obtain better access to foreign markets that fulfill their need to expand their business globally. Among the several reasons that compel small and medium-sized Indian companies to establish offshore businesses, tax matters are the most crucial. 

As per Indian tax laws and regulations, domestic companies in the country are imposed with taxes on their corporate income and profits from worldwide. However, an offshore company setup can provide them with minimal tax compliance duties, lower tax rates, and increase their profits, if a proper business structure is followed. 

An Indian company incorporated outside the country is still subjected to tax liabilities imposed by the government if it fails to clarify its foreign tax residence with Indian authorities. Now, the question that has arisen is what makes an offshore company established by an Indian in Dubai exempted from Indian tax liabilities. The answer lies in your company’s POEM.

What is POEM (Place of Effective Management)?

The concept of POEM was introduced in the Financial Act of 2015 to determine the residency of a foreign company in India. POEM is the location where important management and business decisions are made for the organizations. It was introduced to incorporate tax obligations on companies operating in foreign countries that are controlled by India. 

Is the POEM Rule Applicable for Your Company? 

The final guidelines for determining the foreign companies POEM’s were released by the Indian Tax Authorities in January 2017. An offshore company outside India completely or partially owned by an Indian national is considered a residential company if its POEM is in the country. These rules are applicable since the financial year 2016-17 and future years. It also states that the offshore companies established by Indians are not subjected to POEM guidelines if their turnover in the last financial year was less than 50 crores. 

How to Find Out if the POEM Guidelines Apply to your Dubai-Based Offshore Company?

An offshore company completely or partially owned by an Indian citizen in Dubai, UAE will not be subjected to POEM guidelines if it is engaged in an ABOI (Active Business Outside India). An organization shall be classified as an Active Business Outside India (ABOI) if, throughout the financial year 2016-17 year or in the previous two financial years:

• Its passive income has not exceeded its total income. The passive income of a company is determined by sales of assets, rental income, capital gains, etc. If an offshore company’s passive income is less than 50% of its total income, it’s not subjected to POEM guidelines.

• The total percentage of the company’s assets within India must be less than 50% of its total assets. 

• The company must not hire more than 50% of internal and outsourcing employees in India. Also, the percentage of Indian nationals working in the company must be less than 50%. 

• The company’s overall expenditure on payroll including salaries, wages, bonuses, etc. on Indian employees must not exceed 50% of its total expenditure. 

What are the Three Jurisdictions for Offshore Company Formation in Dubai?

1. Jebel Ali Free Zone (JAFZA): 

Jebel Ali Offshore Company formation is a reliable choice for Indian citizens who wish to establish offshore companies in Dubai, UAE. It is advantageously located in proximity to major ports in the city, which makes it easy for businesses to conduct their operations. The most significant benefit offered by JAFZA is its 0% corporate and personal income tax policy for up to 50 years.

2. Ras Al Khaimah (RAK):

RAK offshore company formation offers Indian entrepreneurs and investors lucrative investment returns. RAK is a leading and rapidly evolving emirate in the UAE, which serves as a gateway to global markets. Its most highlighting feature is the one-day incorporation process, which greatly benefits foreign businesses. 

3. Ajman Free Zone (AFZ):

Ajman offshore company formation is the most cost-effective option for Indian investors who want to set up an offshore company in Dubai, UAE. It is closely located at Ajman port and Dubai and Sharjah airports. In addition to its strategic location, the offshore company setup process here is feasible and quick. 

Conclusion:

Every jurisdiction has its own rules and regulations about offshore company formation. You can take the assistance of professionals at Start Any Business (SAB), to get information about operational principles and procedures for registering a business in a particular jurisdiction. With over 10 years of expertise, we are the leading business consultancy in India which can assist you significantly in tax planning for your Dubai offshore company formation. 

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