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Tax Advantages for a Freelancer Operating in the UAE vs. India

(Case Study: Annual Revenue of INR 5 Crores)

Introduction

 For a freelancer earning around INR 5 Crores (approximately AED 2.2 million*) annually, tax efficiency can significantly impact net income. This article presents a comparative analysis of tax liabilities and obligations in India versus the United Arab Emirates (UAE). Additionally, it highlights the UAE’s Small Business Relief program, which offers substantial benefits to businesses under certain revenue thresholds.

Comparative Overview

Tax/AspectIndiaUAE
Personal Income Tax
  • Up to 30% for high earners.
  • Surcharge (up to 37%) + 4% Cess.
  • Effective rate can exceed 35%of net income.
  • No personal income tax for individuals.
Corporate Tax
  • Applicable if operating as a corporate entity in India (25% or 30% for domestic companies, depending on turnover), plus surcharge and cess.
  • 9% corporate tax was introduced in 2023.
  • Small Business Relief: 0% on taxable profits up to AED 3 million (~INR 6.8 Cr).
Goods & Services Tax (GST/VAT)
  • 18% GST on services.
  • A threshold of INR 20 lakhs for registration.
  • Complex filing and reporting requirements.
  • 5% VAT on most goods/services; some free zones offer special exemptions.
  • Registration threshold of AED 375,000 (~INR 85 lakhs).
Compliance & Administration
  • Frequent rule changes require ongoing professional support.
  • Involves TDS, advance tax, GST returns, etc.
  • Generally simpler.
  • Fewer compliance requirements.
  • Pro-business environment and stable regulations.
Overall Tax Burden
  • Can exceed 35% of net income once surcharges, cess, and GST are factored in.
  • Possible 0% (if profits fall under the AED 3 million threshold for corporate tax) + no personal income tax, drastically reducing overall liability.

Case Study: Freelancer Earning INR 5 Crores

Operating in India

  •  Annual Revenue: INR 5 Crores  
  • Income Tax (Highest Slab + Surcharge + Cess): Potentially over 35% of net income.
  • GST: 18% on services, requiring regular filings and compliance.
  • Net Retention: Significantly reduced after accounting for personal income tax, GST, surcharge, and cess.

Operating in the UAE

  •  Annual Revenue (Approx. AED 2.2 million):  
    • Qualifies for Small Business Relief (0% corporate tax on taxable profits up to AED 3 million).
    • No Personal Income Tax—the freelancer keeps more of their earnings.
  • VAT: 5% (if registering) but with simpler compliance. Some free zones and certain service exports may have special treatments or exemptions.
  • Net Retention: Much higher due to the absence of personal income tax and 0% corporate tax under the small business threshold.

Key Takeaways

Substantial Tax Savings in the UAE

No Personal Income Tax and potentially 0% Corporate Tax under the Small Business Relief program can yield significantly higher net income compared to India.

Simpler Tax Compliance and Business Environment

The UAE’s pro-business policies, simpler VAT framework, and stable tax regulations reduce administrative overhead.

Greater Retention of Profits

For freelancers earning up to AED 3 million (~INR 6.8 Crores), the UAE’s Small Business Relief offers a compelling advantage, especially when coupled with zero personal income tax.

Global Bank Account & Residence Permit

Having a registered company in the UAE makes you eligible for a global business bank account, enabling seamless billing to foreign clients.

You can also secure a 2-year residence permit for you and your family members, facilitating easier global mobility and extended stays in the UAE.

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Conclusion

For a freelancer with annual revenues of INR 5 Crores, shifting operations to the UAE can drastically reduce the effective tax burden. The UAE’s Small Business Relief (0% corporate tax on taxable profits below AED 3 million) and absence of personal income tax present a strong financial incentive. Combined with the benefits of a global business bank account and a 2-year UAE residence permit, the UAE’s favourable tax structure and business-friendly policies stand out as a clear advantage for high-earning freelancers.

Disclaimer:

This document provides a high-level overview. Specific conditions, registration requirements, and additional regulations apply. Always seek professional tax and legal advice tailored to your individual situation. Filings.ae experts are ready to assist you.

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Author

Lionel Charles

Author: RENU SURESH Renu Suresh is a proficient writer with a knack for turning intricate legal concepts into clear, actionable advice. Her articles empower entrepreneurs by providing the knowledge they need to navigate the complexities of business laws, ensuring they can start and manage their businesses effectively. Updated on: January 7th, 2025

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