India Market Entry for UAE Companies
The India-UAE CEPA, the UAE corporate tax, and the substance a UAE holding company needs, for UAE parents and for groups routing through the UAE.
The UAE is both a source of investment into India and a common holding location for groups from elsewhere. UAE companies come to India for trade, real estate, logistics, technology and financial services, and the India-UAE Comprehensive Economic Partnership Agreement, in force since May 2022, and the bilateral investment treaty that followed have made the corridor more active. UAE structures also face more scrutiny than before, because the UAE now has a corporate tax and Indian anti-avoidance rules look hard at holding companies.
How the UAE tax position changed
The UAE introduced a federal corporate tax from June 2023, at 9 per cent on profits above a threshold, and a minimum top-up tax for large groups from 2025. India expects a UAE tax residency certificate before applying treaty rates, and the rates themselves should be confirmed in the treaty text.
The UAE introduced a federal corporate tax from June 2023, at 9 per cent on profits above a threshold, and a domestic minimum top-up tax for large multinational groups from 2025. A UAE company that is a tax resident can ask the UAE authorities for a Tax Residency Certificate, which India expects before it applies treaty rates. The India-UAE treaty reduces India's withholding tax on dividends, interest and royalties, and it has its own rules on technical fees and capital gains. The rates depend on the holding percentage and the type of payment. Confirm the current rate against the treaty text and Indian notifications before applying one, and see our DTAA guide to UAE, Singapore and Mauritius structures.
Substance, not a mailbox
Indian authorities check whether a UAE company has staff, premises, decision-making and a commercial reason beyond the tax benefit. A company that only holds shares and passes money on is vulnerable to challenge under India's anti-avoidance rules, and the choice between the UAE and Mauritius often turns on these facts.
Indian authorities check whether the UAE company has staff, premises, decision-making and a commercial reason beyond the tax benefit. A UAE company that only holds shares, has no local management and passes the money straight on is vulnerable to challenge under India's General Anti-Avoidance Rule and the principal purpose test. We have seen the choice between the UAE and Mauritius turn on exactly these facts, as in our case study of why a manufacturer's India investment was routed through the UAE and not Mauritius.
Entry structures and free zones
UAE investors usually set up an Indian private limited company with the UAE entity as shareholder, reporting the equity inflow to the Reserve Bank of India within 30 days of allotment. Some financial businesses use GIFT City, and borrowing from UAE lenders follows India's external commercial borrowing rules.
UAE investors usually set up an Indian Private Limited company with the UAE entity as shareholder. Equity inflows are reported on Form FC-GPR within 30 days of allotment. GIFT City in Gujarat is India's international financial services centre, and some financial businesses use it, and our article on GIFT City compared with Mauritius explains how it is used. Indian companies owned by UAE investors can also borrow from UAE lenders subject to the external commercial borrowing rules, which our treasury and FX service handles.
Frequently asked questions
Is the UAE still a good holding location for India? It can be, for a business with real management and operations there. A pure holding shell is exposed to anti-avoidance challenge.
Does the India-UAE CEPA remove the need for tax planning? No. The CEPA covers trade and investment access. Tax treatment is set by the double taxation treaty and Indian tax law.
What documents prove UAE tax residency to India? A Tax Residency Certificate from the UAE authority and Form 10F, given to the Indian payer before it applies a treaty rate.
Can Indian-origin investors in the UAE invest in India? They can, but FEMA classifies them by residency and citizenship, and the rules differ for non-resident Indians and for overseas entities they control. Take advice before the first transfer.