Expanding your business internationally can be an exciting venture, and setting up a wholly-owned subsidiary in the United Arab Emirates (UAE) can provide numerous opportunities for growth. However, it is essential to understand the process of remitting capital from India to the UAE and the tax implications involved. In this blog post, we will guide you through the steps to establish a wholly-owned subsidiary in the UAE and remit capital, while also addressing the tax considerations.
Step 1: Obtain Necessary Approvals
Before remitting capital, it is crucial to obtain the necessary approvals from the Reserve Bank of India (RBI) or authorized banks in India. These approvals ensure compliance with the regulations set by the Foreign Exchange Management Act (FEMA). Under the Liberalized Remittance Scheme (LRS), individuals can remit a certain amount of money abroad each financial year. However, for larger amounts, specific approvals may be required.
Step 2: Open a Bank Account
To facilitate the remittance, the business owner needs to open a bank account in India designated as a Foreign Currency Account (FCA) or an Escrow Account. This account will be used to hold the capital that will be remitted to the UAE. It is advisable to consult with your bank to understand the specific requirements and procedures for opening such an account.
Step 3: Documentation
Proper documentation is essential for the remittance process. The business owner will need to provide the necessary documents, including the incorporation documents of the subsidiary in the UAE, board resolution, and any other documents required by the RBI or authorized banks. These documents demonstrate the purpose and legitimacy of the remittance.
Step 4: Remittance
Once the necessary approvals and documentation are in place, the business owner can proceed with the remittance. The capital can be transferred from the FCA or Escrow Account in India to the designated bank account in the UAE. It is advisable to work closely with your bank to ensure a smooth and compliant remittance process.
Regarding the taxability of the remitted amount, it is important to note that remitting capital to set up a wholly-owned subsidiary in the UAE does not attract any tax liability in India. However, it is crucial to consult with a JSB Incorporation (tax advisor) to understand the tax implications in both India and the UAE. Tax laws can vary between countries, and it is essential to comply with the tax regulations of both jurisdictions to avoid any potential issues.
In conclusion, setting up a wholly-owned subsidiary in the UAE from India and remitting capital involves obtaining necessary approvals, opening a designated bank account, providing the required documentation, and executing the remittance process. While the remitted amount is not taxable in India, it is advisable to seek professional advice to ensure compliance with tax regulations in both India and the UAE.
PS: It is advisable to consult with advisors at JSB Incorporation (www.jsb.ae) or reach out to us at +971 58 508 1090 before implementing any advice.