Many Indian founders look at the UAE as a first international market: short flights, a large Indian community, a trade agreement between the two countries and full foreign ownership available for most activities. If you plan to expand your business from India to UAE customers, the licence paperwork is the easy part. The harder questions are where to set up, whether you need a local entity yet, how money moves between the two companies and who will sell for you on the ground. This checklist covers those questions at a high level. Rules change often, so check each point against the official sources linked here and with a licensed adviser before you commit.
Step 1: confirm demand before you set up
A UAE licence costs money every year whether or not you make any sales. Before applying, try to win two or three UAE customers while still operating from India. Run a short outbound campaign to UAE companies that match your ideal customer profile, attend one relevant trade event or sell through a local partner. If buyers insist on a local entity, a local invoice or a local contact person, that is useful evidence for the next step.
Step 2: choose between mainland and free zone
The first structural decision is who licenses the company.
Mainland companies are licensed by the economic department of the emirate they operate in, such as Dubai’s Department of Economy and Tourism or Abu Dhabi’s Department of Economic Development, as listed on the UAE government portal. They can trade directly in the UAE market. Since amendments to the Commercial Companies Law took effect in 2021, foreign investors can fully own most mainland companies, without the local majority shareholder that used to be required. Some activities with strategic impact remain restricted, as the portal’s page on full foreign ownership sets out.
Free zone companies are licensed by a free zone authority. They can be fully foreign-owned and suit import, export, re-export and services sold outside the UAE. According to the official guidance on free zones, direct sales into the mainland are generally not permitted without the required mainland licence or approval. To sell locally, a free zone company usually works through a licensed mainland distributor or sets up a mainland branch or company.
A simple decision rule:
- If most of your customers are businesses or consumers on the UAE mainland, compare mainland options first.
- If you mainly sell to customers outside the UAE, or need a regional base for trading and logistics, a free zone often fits.
- If you are unsure, list your first 20 target customers and where they are licensed before you decide.
Each free zone has its own permitted activities, office requirements, visa allocations and fees, so compare two or three that list your exact activity.
Step 3: understand UAE tax at a high level
The UAE now has a federal corporate tax. The Ministry of Finance has confirmed a 0% rate on taxable income up to AED 375,000 and 9% on income above that, for financial years starting on or after 1 June 2023. Free zone companies that meet the conditions to be a Qualifying Free Zone Person can apply 0% to qualifying income, as the Federal Tax Authority’s free zone persons guide explains. Income that does not qualify is taxed at the standard rate, so do not assume that a free zone means no tax.
VAT in the UAE is charged at 5%. Registration is mandatory once taxable supplies pass AED 375,000, and voluntary registration is available from AED 187,500, according to the Federal Tax Authority. Corporate tax registration is a separate obligation.
India and the UAE have a double taxation avoidance agreement, which affects dividends, service fees and where profits are taxed. Ask your adviser how it applies to the way you plan to bill between the Indian and UAE companies.
Step 4: sort out the Indian side
An Indian company investing in a foreign entity falls under India’s overseas investment framework: the Foreign Exchange Management (Overseas Investment) Rules and Regulations of 2022, and the RBI’s Overseas Investment Directions. Investment goes through your authorised dealer bank, must be in a foreign entity carrying on a bona fide business and comes with reporting obligations. Under the automatic route, the total financial commitment is capped by reference to the Indian entity’s net worth (400% of net worth under the rules at the time of writing), and the directions require prior RBI approval for commitments above USD 1 billion in a financial year.
If you are investing personally rather than through your company, the Liberalised Remittance Scheme limit of USD 2,50,000 per financial year applies, according to the RBI’s FAQ.
Plan transfer pricing early. If the Indian team builds the product and the UAE entity sells it, the two companies need a written agreement and arm’s-length pricing for the services between them.
Step 5: use the trade agreement where it applies
The India-UAE Comprehensive Economic Partnership Agreement entered into force on 1 May 2022. If you export goods, check whether your products qualify for reduced duties and which certificate of origin you need. Service businesses should look at the commitments made for their sector.
Step 6: data, banking and operations
- Data: the UAE’s federal personal data protection law, Federal Decree-Law No. 45 of 2021, covers processing of personal data by electronic means, and some free zones such as DIFC have their own data protection laws. See the government overview. Data you hold on users in India still falls under India’s DPDP Act.
- Banking: banks ask for detailed source-of-funds and business plan documents when opening a corporate account. Prepare them early and expect the process to take time.
- Visas and office: your licence type decides how many residence visas you can sponsor and whether you need a physical office.
- Contracts: update your templates for UAE governing law, or the relevant free zone courts, and for invoicing in AED.
- People: decide whether your first UAE hire is a salesperson, a country manager or a partner on commission.
The checklist to expand your business from India to UAE
- Two or three UAE customers or signed letters of intent
- Mainland or free zone decision, with the reasons written down
- Shortlist of licensing authorities or free zones that list your activity
- Corporate tax and VAT position confirmed with an adviser
- Indian overseas investment route agreed with your bank, with filings planned
- Intercompany agreement and transfer pricing approach
- CEPA eligibility checked if you sell goods
- Data protection review covering both countries
- Bank account documents ready
- First hire or partner on the ground
Emberoot works with founders on market entry and go-to-market strategy for India and the UAE, including testing demand before you take on a licence.
If the UAE is on your list for next year, tell us about it on a free call.
This is general information, not legal or tax advice. Rules change, so confirm the current position with the official sources and a licensed adviser.
Frequently asked questions
Can an Indian own 100% of a company in the UAE?
For most activities, yes. Free zone companies can be fully foreign-owned, and since amendments to the Commercial Companies Law took effect in 2021, foreign investors can also fully own most mainland companies. Some activities with strategic impact still carry ownership restrictions, so check your specific activity with the licensing authority before you apply.
Is a UAE free zone company tax-free?
Not automatically. The UAE charges 9% corporate tax on taxable income above AED 375,000. A free zone company that meets the conditions for a Qualifying Free Zone Person can apply 0% to qualifying income, but other income is taxed at the standard rate, and VAT rules still apply. Confirm your position with a registered tax adviser.
Do I need RBI approval to set up a company in the UAE?
Most investments by Indian companies in a foreign entity fall under the automatic route, which needs no prior RBI approval but must go through your authorised dealer bank with the required filings. Investments beyond the automatic route limits, or in restricted activities, need approval. Your bank’s foreign exchange desk can confirm which route applies to you.