Can Indian freelancers and tech founders avoid paying the income tax by shifting base to Dubai?
Tax optimisation is a key financial incentive at the center of all of these changes. Indian tax authorities can tax up to 30 per cent of your international income, which often diminishes the overall earnings for entrepreneurs and independent contractors whose primary income depends greatly on customers and users outside of India.
The UAE, on the other hand, is one of the most attractive countries, especially for professionals who favour digital technology and for other rich people due to its 0 per cent income tax on both personal income and capital gains.
'There's a clear shift in the behaviour as more Indian freelancers, tech founders, and agency owners are choosing UAE residency not just for its lifestyle, but as a smart financial strategy. With India's 30% tax on global income, setting up a compliant offshore structure in a 0% tax regime like Dubai is fast becoming the norm for digital-first entrepreneurs who earn globally and want to scale sustainably,' says Varun Singh, MD, XIPHIAS Immigration.
He added, 'As of 2025, approximately 4 million Indians reside in the UAE, with around 2 million in Dubai alone. However, specific figures on how many of those are freelancers or independent workers aren't available.' Global client base, local tax burden: For a significant number of Indian tech entrepreneurs and freelancers, a large part of their income will come from clients in Southeast Asia, Europe, or the United States. The individual will still need to pay taxes on worldwide income, even if it is coming from an offshore source if they remain a tax resident in India, which is to spend 182 days or more in India in a fiscal year. Digital work is borderless: Cloud-based and remote-first modes of production are the model for careers like software development, digital marketing, content creation, and SaaS companies, which makes it very easy for entrepreneurs to forego their physical presence in India and relocate to a low-tax jurisdiction such as the United Arab Emirates, while still operating a business. Ease of business and residency in UAE: The UAE provides a Golden Visa, freelance permits, and free zone company formations with 100% ownership and seamless banking solutions that enable you to live and work there, and it easily supports this new up and coming era of entrepreneurs with an ever-expanding group of Indian expats, legal advisers, and entrepreneurial networks.
Experts are cautioning that simply launching a business in Dubai or obtaining UAE residency will not save you from tax laws back home in India. Such arrangements are always monitored by the Income Tax (I-T) Department, especially in light of regulations such as the Significant Economic Presence (SEP), GAAR (General Anti-Avoidance Rule), and Place of Effective Management (POEM).
'Merely relocating or setting up entities in the UAE, without genuinely shifting control and residential status outside India, may still trigger Indian tax liabilities under provisions like Place of Effective Management (POEM) and others. To truly optimise tax exposure, individuals must ensure actual relocation, robust documentation, and full compliance with both Indian and UAE tax regulations. When backed by real substance and strategic planning, such a move can lawfully reduce taxes and open doors to global business opportunities,' says Avnish Arora, Executive Director, Direct Tax, Forvis Mazars in India.
If you're an Indian entrepreneur considering relocating to the UAE for tax purposes, here's what you need to know: Tax residency status : To avoid being classified as an Indian tax resident, you would need to be in India for less than 182 days in a given fiscal year.
: To avoid being classified as an Indian tax resident, you would need to be in India for less than 182 days in a given fiscal year. Substance over structure : The offshore entity needs to have real commercial activity in the UAE. This includes operational control from the UAE, employees or contractors working there in the UAE, and physical office presence (even co-working).
: The offshore entity needs to have real commercial activity in the UAE. This includes operational control from the UAE, employees or contractors working there in the UAE, and physical office presence (even co-working). POEM compliance : Ensure that significant board meetings, financial control, and management decision points are made outside of India.
: Ensure that significant board meetings, financial control, and management decision points are made outside of India. Banking & invoicing : Maintain appropriate segregation of your Indian financial and UAE financial channels. Your customers should pay into UAE business business accounts any money owed.
: Maintain appropriate segregation of your Indian financial and UAE financial channels. Your customers should pay into UAE business business accounts any money owed. Double Taxation Avoidance Agreement: India and the UAE's Double Taxation Avoidance Agreement (DTAA) is in place. You can obtain legal relief from double tax if properly structured, but only if you comply with both statutes.
As India continues to digitise its tax surveillance and enforce stricter compliance through AIS, TDS, and global data sharing agreements, digital-first entrepreneurs are recognising the value of proactive planning. A UAE move isn't a tax evasion strategy—it's a compliance-friendly restructuring option that rewards those who think globally. But this must be done with an attorney and informed tax consultants.
Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Readers are advised to consult with qualified tax professionals, legal advisors, or financial consultants before making any decisions regarding offshore residency, taxation, or business restructuring. Tax laws are subject to change and may vary based on individual circumstances.
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