Setting Up a UAE Company from India — Free Zone vs Mainland, Corporate Tax, ODI, LRS and POEM Checklist

1 September 2026 · International · I. H. Khan and Associates

Hardly a week passes without a client asking us about setting up in Dubai. The UAE side of the process is quick and well marketed; the Indian side is where most mistakes are made. This checklist covers both, in the order in which the decisions should actually be taken.

Step 1 — Be clear about why

The structure follows the purpose. Serving customers in the Gulf or Africa, holding overseas investments, obtaining a residence visa for the family, or raising international capital each point to a different licence and emirate. A trading company that will sell into the UAE market needs a mainland licence or a free zone company plus a local distributor; a consultancy billing overseas clients is well served by a cost-effective free zone; a holding company for investments may be better placed in RAK ICC, DIFC or ADGM.

Step 2 — Choose mainland, free zone or offshore

Mainland (DED / DET licence): trade anywhere in the UAE, take government contracts, unlimited visas linked to office space. 100% foreign ownership for most activities. Needs a physical office (Ejari).
Free zone (e.g. DMCC, IFZA, RAKEZ, JAFZA, Meydan, SHAMS): 100% ownership, fast licensing, flexi-desk options, visa quota by package, and potential 0% corporate tax on qualifying income. Restricted from directly trading with the mainland.
Offshore (RAK ICC, JAFZA Offshore): holding vehicle only, no UAE trade, no visas. Low cost; banks look closely at purpose.

Step 3 — Understand UAE tax before you sign the lease

Corporate tax at 9% applies to taxable income above AED 375,000. A free zone company can be a Qualifying Free Zone Person and pay 0% on qualifying income only if it maintains adequate substance in the free zone, earns qualifying income (broadly, transactions with other free zone persons and specified activities), keeps audited accounts, complies with transfer pricing and does not exceed the de minimis threshold for non-qualifying revenue. Every company must register for corporate tax with the Federal Tax Authority and file a return within nine months of year-end, even if no tax is due. VAT at 5% requires registration once taxable supplies exceed AED 375,000.

Step 4 — Fund the company through a permitted Indian route

This is where Indian promoters most often go wrong. Money cannot simply be transferred to the UAE company from an Indian bank account. Under the Overseas Investment Rules, 2022:

An individual can invest under the Liberalised Remittance Scheme up to USD 250,000 per financial year, in the equity of a foreign entity engaged in bona fide business activity, subject to the Overseas Direct Investment procedure (Form FC through the AD bank and a UIN). Investing in a foreign entity that is engaged in financial services, or that has a step-down subsidiary in India, is restricted.
An Indian company or LLP can invest under the automatic route up to 400% of its net worth as total financial commitment, with a board resolution, statutory auditor's certificate and Form FC, and a valuation where prescribed.
Remittances under LRS attract TCS under section 394 (206C(1G) of the 1961 Act) at 20% on amounts above ₹10 lakh in a financial year; the TCS is creditable against your Indian tax.
The share certificate must be received and reported within six months, and an Annual Performance Report filed every year by 31 December based on the audited accounts of the UAE entity.

Step 5 — Keep management genuinely in the UAE (POEM)

A foreign company is treated as tax-resident in India if its place of effective management — where key management and commercial decisions are in substance made — is in India. If the UAE company is run from an office in Mumbai by Indian resident directors with no real activity in Dubai, its worldwide profits can be taxed in India at 40%. A resident manager in the UAE, board meetings held there with proper minutes, local bank signatories and real office presence all matter. The same facts also support the free zone company's substance test for the 0% rate.

Step 6 — Plan transactions with your Indian business

If the UAE company buys from, sells to or receives services from your Indian company, the transactions are between associated enterprises and must be at arm's length under Indian transfer pricing rules, documented, and reported in Form 3CEB. Payments from India to the UAE company may require Form 15CA/15CB and may attract withholding depending on their nature. Profits parked in the UAE that should have been earned in India are the most common ground for an Indian tax dispute in these structures.

Step 7 — Disclose in India

Report the shareholding in the UAE company in Schedule FA of your Indian return every year, along with any directorship, bank account signing authority and income received. Dividends from the UAE company are taxable in India at your slab rate (there is no UAE withholding). Non-disclosure attracts a penalty of ₹10 lakh per year under the Black Money Act irrespective of the value of the asset.

Step 8 — Banking and visas

Corporate bank account opening in the UAE takes two to six weeks and requires a clear business profile, proof of activity and usually the signatory's presence. Residence visas follow the licence: the manager's visa first (medical, Emirates ID biometrics), then family and staff within the visa quota. Budget for these timelines when planning your first invoice.

A realistic budget and timeline

A free zone company with one visa is typically licensed within one to three weeks; add two to six weeks for the bank account. Indian ODI filings should be completed before the first remittance. We prepare the entire sequence — UAE licence, Indian filings, tax registrations and the compliance calendar for both countries — as a single engagement. Read more about our UAE service or contact us to start.

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

Setting up a UAE company from India: the complete checklist