Setting up a manpower or recruitment company in the UAE from India

A manpower business between India and the UAE is regulated in both countries. In the UAE, recruitment and labour supply are licensed activities under the Labour Law, supervised by the Ministry of Human Resources and Emiratisation (MOHRE), with a bank guarantee of AED 300,000 or AED 1 million, depending on the activity.

In India, recruiting Indian workers for jobs abroad is governed by the Emigration Act, 1983. It can lawfully be carried on only by a recruiting agent registered with the Protector General of Emigrants, or by a foreign employer recruiting directly with permission. Setup guides often cover only one side; this note covers both, together with the tax and foreign-exchange steps for an Indian promoter.

1. Decide which business you are running

The UAE rules recognise two kinds of private employment agency, and the choice drives the licence, the guarantee and the risk.

On a phone, swipe the table sideways to see both columns.

A combined licence covers both activities. A mediation agency must bring the worker home at its own cost if the worker fails the medical, turns out not to be qualified, or the standard contract was not signed. A temporary employment agency may not pass its workers on to another temporary employment agency, and may not supply workers to a client that is in a collective labour dispute or whose establishment has been suspended.

Recruiting housemaids and other domestic workers is a separate regime with its own licence under Federal Decree-Law No. 9 of 2022, and is not covered here.

2. The UAE licence

The activity is governed by Article 6 of Federal Decree-Law No. 33 of 2021 (the Labour Law), Article 9 of its Executive Regulations (Cabinet Resolution No. 1 of 2022) and Ministerial Resolution No. 51 of 2022 on licensing recruitment agencies. A mainland agency needs two approvals: a trade licence from the emirate's economic department for the recruitment or labour supply activity, and the separate MOHRE agency licence. MOHRE's conditions include:

• Premises with a clear address, used for the employment business, unless MOHRE approves electronic operation under its procedures manual.
• A bank guarantee of AED 300,000 (mediation) or AED 1,000,000 (temporary employment or combined), renewing automatically, which MOHRE can draw on for amounts the agency owes. An approved insurance scheme can be used instead.
• Owners: none may be a MOHRE employee or a relative of one up to the second degree, have convictions for offences of honour or trust, human trafficking or Labour Law offences, or own an establishment whose operations were stopped for violating the Labour Law.
• Documents including a credit report, police clearance, a financial solvency certificate, the economic department's initial approval, the trade licence, a location sketch, and copies of the licensee's passport and Emirates ID.
• Annual renewal. A licence not renewed within 30 days of expiry is treated as operating without a licence.

No recruitment fees from workers. The Labour Law bars employers from charging workers recruitment fees or costs, directly or indirectly, and Ministerial Resolution No. 51 of 2022 applies the same rule to labour supply agencies. MOHRE can require an agency to refund amounts the worker paid, including to an agent abroad that the agency dealt with. The 2018 India–UAE memorandum of understanding on manpower cooperation also provides that the employer bears the costs of recruitment.

Ownership. The federal rules for this activity no longer require UAE national ownership, but whether a mainland company can be 100% foreign-owned is decided by each emirate's economic department. Confirm it for the specific activity and emirate at the initial-approval stage, before committing to premises or a guarantee.

3. Mainland or free zone?

Several free zones offer recruitment, temporary employment and human-resources activities, and a free zone company is often cheaper to set up. For a business that will place staff with mainland clients, a free zone company on its own may not be suitable:

• Mainland agencies need the MOHRE agency licence; free zones license recruitment under their own rules, and DIFC and ADGM have their own employment laws. Workers on a free zone visa cannot simply be deployed to mainland clients, so labour supply to mainland clients is generally structured through a mainland company or branch holding the MOHRE licence. Confirm the position with the free zone authority and MOHRE before you commit.
• For corporate tax, supplying staff to third parties and recruitment are not on the list of "qualifying activities" for the 0% free zone rate (Ministerial Decision No. 229 of 2025). Fees from other free zone companies that are themselves the beneficial recipients of the service can still be qualifying income, but fees from mainland clients, clients outside the UAE and individuals are non-qualifying. They count against the de minimis allowance — the small amount of non-qualifying revenue a free zone company may earn — of 5% of revenue or AED 5 million, whichever is lower. Breach it and the company loses the 0% rate for that year and the next four.

A free zone company can still make sense for a recruitment consultancy whose clients are mainly other free zone companies. An Indian company can also use one as a holding company above a mainland operating company; a resident individual cannot, for the reason explained in section 6. Our notes on setting up a UAE company from India and free zone versus mainland cover the wider choice.

4. The India side: recruiting Indian workers

The UAE is an Emigration Check Required (ECR) country. Workers whose passports are marked ECR need emigration clearance from the Protector of Emigrants before they leave India for work there.

Section 10 of the Emigration Act, 1983 prohibits anyone from carrying on the business of recruitment in India except under a certificate from the registering authority. Section 16 allows a foreign employer to recruit Indians only through a registered recruiting agent or under a permit for direct recruitment.

Route A — through a registered recruiting agent in India

If the plan is to recruit Indian workers in any volume, the UAE company will need to work through a registered Indian recruiting agent: either an existing one it engages, or its own Indian company or proprietorship registered with the Protector General of Emigrants. In practice the certificate is held by an Indian person or entity with an office in India — the Rules require Indian premises, three years' Indian income tax returns and police verification — so a UAE company either engages an existing agent or sets up its own Indian entity. The main requirements under the Emigration Rules, 1983 and the Ministry of External Affairs (MEA) guidelines are:

• Security: a bank guarantee or insurance bond of ₹50 lakh valid for 8½ years, or a reduced ₹8 lakh that allows recruitment of only 100 workers, with a further ₹8 lakh for each additional 100 (rule 8, as amended in December 2023).
• Application: a fee of ₹25,000 (the Rules provide ₹10,000 for the reduced-security category); a bachelor's degree or two-year diploma; CA-certified financial statements and three years' income tax returns.
• Office of at least 50 square metres with an interview room and waiting area, a website showing the registration and service charges, and no sub-agents.
• Inspection and police verification before the certificate is issued. The certificate runs for up to five years, and renewal must be applied for at least 90 days before it expires.
• Service charges collected from a worker are capped by Indian rules at ₹30,000 plus GST, paid digitally or by demand draft with a receipt. Visa fees, the medical, the air ticket and pre-departure lodging are for the foreign employer to bear.

Because UAE law prohibits recruitment costs being passed to the worker, the compliant approach for a UAE employer or agency is to bear the Indian agent's charge itself — priced into its fee to the client — and not to recover it from the worker later, for example through salary deductions.

Route B — direct recruitment by the UAE employer

A UAE employer can register on India's eMigrate portal as a foreign employer and recruit directly, but the Embassy of India in Abu Dhabi's guidance limits this to small numbers — up to ten workers in a year; larger requirements must go through a registered Indian recruiting agent. The direct-recruitment permit rules also bar the employer from supplying the workers recruited to another agency or concern, which sits awkwardly with a labour supply model, and provide for a bank guarantee of ₹10,000 per worker (minimum ₹1 lakh). Take advice before relying on this route.

What every ECR recruitment needs

• A demand and employment contract generated on eMigrate, at a wage that meets the minimum referral wage MEA sets for the job.
• Visa attestation through the Indian mission's service provider, and emigration clearance for the worker.
• Compulsory Pravasi Bharatiya Bima Yojana insurance: ₹275 for two years or ₹375 for three, with ₹10 lakh cover for accidental death or permanent disability.
• For women workers with ECR passports: they must be at least 30 to obtain emigration clearance. An employer may recruit them directly, lodging a refundable deposit (currently AED 9,200 per worker) with the Indian mission's service provider at visa attestation, or through one of the state-government recruitment agencies the mission lists, in which case no deposit is required. Nurses need emigration clearance for ECR countries whatever their passport, and MEA restricts the agencies that may recruit them; check the current position before planning nurse recruitment.

Penalties under section 24 of the Act include imprisonment of up to two years for recruiting without a certificate or for collecting charges above the permitted limit. India published a draft Overseas Mobility (Facilitation and Welfare) Bill, 2025 for consultation in October 2025 to replace the 1983 Act. As at the date of this note we are not aware of it having been introduced in Parliament, so the 1983 Act and Rules continue to apply.

5. Running the UAE company: tax and employer obligations

• VAT. Supplying staff to UAE clients is a standard-rated 5% supply. In its public clarification VATP038, the Federal Tax Authority (FTA) takes the view that VAT is due on the full consideration for the manpower service, including salaries and benefits the client pays to the workers directly. Registration is mandatory once taxable supplies exceed AED 375,000 over the previous 12 months, or are expected to in the next 30 days.
• Corporate tax at 9% on taxable income above AED 375,000 (0% below). As explained in section 3, manpower and recruitment income from mainland, overseas and individual clients does not qualify for the free zone 0% rate.
• Wages through the Wage Protection System (WPS). Every worker on the agency's visa must be paid through WPS. Under Ministerial Resolution No. 340 of 2026, in force from 1 June 2026, wages for a month are due on the first day of the following month and at least 85% of total wages must be paid on time; delays lead to warnings, suspension of new work permits, fines and a lower MOHRE classification, which raises work-permit fees.
• End-of-service gratuity for workers with at least a year's service: 21 days' basic wage for each of the first five years and 30 days for each year after, capped at two years' wages. For a labour supply business this is a real liability and should be provided for monthly.
• Health insurance paid by the employer: mandatory in Dubai and Abu Dhabi, and in Sharjah, Ajman, Ras Al Khaimah, Fujairah and Umm Al Quwain since 1 January 2025, as a condition of issuing or renewing the worker's residence visa.
• Unemployment insurance (the Involuntary Loss of Employment scheme, ILOE) is a subscription the worker must hold in their own name; it is sensible to check enrolment as part of onboarding.

6. Investing from India: foreign exchange rules and Indian tax

Overseas direct investment (ODI). An Indian resident setting up or buying into the UAE company is making an overseas direct investment under the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022 — see our note on the ODI rules, Form FC and the APR.

• A resident individual may invest only in an operating company, within the Liberalised Remittance Scheme (LRS) limit of USD 250,000 a financial year, and may not lend to it. Where the individual controls the UAE company, it may not have a subsidiary of its own.
• An Indian company may invest up to 400% of its net worth.
• Before remitting, obtain a unique identification number (UIN) through your authorised dealer bank and file Form FC; submit evidence of the shares within six months; and file an Annual Performance Report (APR) by 31 December each year.
• Individuals pay tax collected at source (TCS) of 20% on LRS remittances for investment above ₹10 lakh a year. It can be set off against your Indian tax, but it ties up cash.
• For a labour supply licence, the AED 1 million guarantee alone (about USD 272,000) is more than one person's annual LRS limit. Plan for investment by more than one family member (each becoming a shareholder in their own right), over two financial years, through an Indian company, or with borrowing by the UAE company itself (a resident individual may not guarantee it).

Where the company is managed. If the key management and commercial decisions of the UAE company are in substance taken in India, it risks being treated as resident in India under the place-of-effective-management test, with its worldwide profits taxable here. CBDT guidance issued under the 1961 Act applied the test only where turnover exceeded ₹50 crore; until that position is confirmed under the Income-tax Act, 2025, do not rely on it.

The India–UAE tax treaty treats a UAE company as resident in the UAE only if it is managed and controlled wholly there. What matters is where decisions are actually taken: a UAE-based manager with real authority and board meetings held in the UAE help, but formalities will not help if decisions are in fact made in India. Our note on when a UAE company becomes taxable in India explains the test.

Getting profits home. The UAE does not withhold tax on dividends, so a dividend to an Indian resident individual is taxed in India at slab rates with no foreign tax to credit. A resident and ordinarily resident individual who holds shares in a foreign company must file an Indian return and report the holding in Schedule FA. Failing to report foreign assets (other than immovable property) worth more than ₹20 lakh in total can attract a ₹10 lakh penalty under the Black Money Act.

7. A typical sequence

1. Decide the model — mediation, labour supply or both — and the emirate.
2. Obtain the economic department's initial approval and confirm the ownership position.
3. Lease premises, obtain the trade licence and open the UAE bank account.
4. Through your Indian authorised dealer bank, obtain the UIN, file Form FC and remit the capital under the ODI rules.
5. Arrange the MOHRE bank guarantee and apply for the MOHRE agency licence.
6. Register for corporate tax within three months of incorporation (FTA Decision No. 3 of 2024), and for VAT when the threshold is reached.
7. In India, engage a registered recruiting agent or apply to register your own with the Protector General of Emigrants (or register the UAE company on eMigrate as a foreign employer for small numbers).
8. Recruit through eMigrate, process visas and work permits, and pay through WPS from the first month.

Questions we are asked

Can I run the UAE agency from India and visit occasionally? The company can be owned from India, subject to the emirate's foreign-ownership position, but MOHRE asks for the licensee's Emirates ID and real premises, and the place-of-effective-management test looks at where decisions are actually made. A UAE-resident manager with genuine authority is one way to meet these requirements; the right arrangement depends on your facts.

Can the Indian recruiting agent charge the worker ₹30,000? Indian rules allow up to ₹30,000 plus GST, but UAE law prohibits recruitment costs being passed to the worker. A UAE agency that relies on worker-paid fees risks refund orders and action against its licence. The compliant approach is for the employer to bear the Indian agent's charge, priced into the fee to the client, with nothing recovered from the worker.

Is a free zone licence enough to supply staff to Dubai mainland clients? It may not be. Confirm the position with the free zone authority and MOHRE, and plan for a mainland company or branch with the MOHRE licence if mainland clients are the core of the business.

Who does not need emigration clearance? It depends on the passport, not the job. Holders of Emigration Check Not Required (ECNR) passports — for example, people who have passed Class 10, graduates and professionals — do not need it. A skilled worker without Class 10 will usually hold an ECR passport and does need it, and nurses need it for ECR countries whatever their passport.

This article is for learning purposes only and is not legal, tax, immigration or other advisory advice. It states the position as on 7 October 2026. Licensing conditions, fees and limits change, so check the local regulations and confirm the current position with the relevant authorities before acting. I. H. Khan and Associates is not a recruiting agent registered under the Emigration Act, 1983; UAE licensing, MOHRE and Federal Tax Authority matters should be confirmed with appropriately licensed UAE advisers.

I. H. Khan and Associates
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.

Related articles

• Setting up in Saudi Arabia from India: MISA licence, ZATCA, Saudization and the regional headquarters programme
• GST Council, 8 October 2026: what the 57th meeting means for small businesses and exporters
• Moving your Web3 company to Dubai: VARA, DMCC, residency and the Indian exit
• GST for freelancers and consultants in Mumbai and Thane: when registration becomes compulsory, export of services and the LUT