By Manu Rao | Updated March 2026
The Scenario
A textiles and spices trader based in Dubai has been sourcing from Indian suppliers for eight years through third-party buying agents. The margins are thin, the quality control is inconsistent, and every shipment involves three intermediaries. He holds a UAE residence visa and is an Indian-origin person with an OCI card. He wants to set up his own Indian company that can buy directly from manufacturers in Surat, Tirupur, and Kochi — cutting out the middlemen and running quality checks on the ground.
His plan is to invest AED 350,000 (roughly Rs 75 lakh) as initial capital, hire a small sourcing team in India, and handle the export documentation himself through the Indian entity.
Why India?
India exported $36.3 billion worth of textiles and apparel in FY2025, and the spice exports crossed $4.4 billion. For a UAE-based trader, the appeal is proximity and price. Dubai to Mumbai is a 3-hour flight, the time difference is only 1.5 hours, and India remains the largest supplier of spices to the Middle East. The UAE-India Comprehensive Economic Partnership Agreement (CEPA), effective since May 2022, reduced tariffs on over 80% of Indian products entering the UAE — making the sourcing economics even better.
Setting up an Indian entity also unlocks access to export incentives under the Merchandise Exports from India Scheme (MEIS) successor — the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme.
Entity Choice
A Private Limited Company is the right structure for this trading operation. Import-export businesses need an Importer Exporter Code (IEC) from DGFT, and Private Limited companies get these without friction. The entity also makes it easier to open a letter of credit facility with Indian banks — which is critical for large textile orders.
He considered a Branch Office of his Dubai company, but RBI regulations restrict branch offices to specific activities listed under FEMA. Trading (buying in India for export) is permitted for branch offices, but the compliance burden is higher and profits must be remitted, not reinvested locally. A Private Limited company gives more operational freedom.
An LLP was another option, but banks are less willing to extend trade finance facilities to LLPs compared to Private Limited companies.
FDI Route and Sector Rules
Trading companies fall under the automatic route for 100% FDI — but with conditions. As per DPIIT FDI Policy, FDI in trading is restricted to:
- Single-brand retail: up to 100% (automatic)
- Multi-brand retail: up to 51% (government route)
- Wholesale/cash-and-carry: 100% automatic
- E-commerce: marketplace model only
His business model — buying from Indian manufacturers for export — falls under wholesale trading and export trading, which is 100% automatic route. No government approval needed. The company will file Form FC-GPR with RBI within 30 days of share allotment.
Important: the UAE is not a Hague Apostille Convention member. This means his documents cannot be apostilled. Instead, they must be attested through the UAE Ministry of Foreign Affairs and then the Indian Embassy in Abu Dhabi or the Indian Consulate in Dubai. This adds 5-7 business days to the document preparation timeline.
Registration Process
From Dubai, the process follows these steps:
- Document Attestation — Since the UAE is not part of the Hague Convention, all documents (passport copies, address proof, bank statements) must go through UAE MOFA attestation followed by Indian Embassy attestation in Dubai/Abu Dhabi.
- Digital Signature Certificate (DSC) — Applied for online with attested documents.
- SPICe+ Form (Part 1) — Name reservation. For a trading company, names containing "Trading" or "Exports" are common.
- SPICe+ Form (Part 2) — Incorporation with PAN, TAN, EPFO, ESIC, and bank account mandate.
- IEC Registration — Importer Exporter Code from DGFT, applied online after incorporation. Takes 2-3 business days.
- AD Code Registration — Authorized Dealer code registered with the customs port where exports will happen.
The 1.5-hour time difference between Dubai and India means real-time coordination is easy. Documents submitted in the morning from Dubai are processed the same business day in India.
Tax Structure
India and the UAE signed a DTAA that took effect in 1994 (amended by protocol in 2007). Key rates:
| Income Type | DTAA Rate | Domestic Rate |
|---|---|---|
| Dividends | 10% | 20% |
| Interest | 12.5% | 20% |
| Royalties | 10% | 20% |
The UAE has no personal income tax and no corporate tax on most trading income (UAE corporate tax of 9% applies above AED 375,000 from June 2023, but free zone entities may be exempt). This means the DTAA benefit is largely one-directional — reducing Indian withholding taxes on payments going to the UAE.
The Indian company will pay 25% corporate tax (plus surcharge and cess) under Section 115BAA. Export income can benefit from deductions under Section 10AA if the company operates from a Special Economic Zone (SEZ), though this incentive is being phased out for new units.
He must obtain a Tax Residency Certificate (TRC) from the UAE Federal Tax Authority to claim DTAA benefits in India. Without the TRC, the Indian company must withhold tax at domestic rates.
Ongoing Compliance
- Board meetings — 4 per year, gap not exceeding 120 days
- AGM — Within 6 months of financial year end
- Annual Return (MGT-7A) and Financial Statements (AOC-4) — Filed with MCA
- GST Returns — Monthly GSTR-1 and GSTR-3B. Export invoices are either zero-rated (with IGST refund) or under Letter of Undertaking (LUT) for export without payment of tax
- RBI FLA Return — Annual filing by July 15
- DGFT filings — Annual Returns for IEC holders
- Customs documentation — Shipping bills, bills of lading, certificates of origin (especially for CEPA preferential tariff claims)
Common Pitfalls
- Not getting embassy attestation early enough — The Indian Embassy in Dubai can have 2-3 week wait times during peak season. Start the attestation process before anything else.
- Ignoring transfer pricing on related-party exports — If the Indian company sells to his Dubai entity at below-market rates, transfer pricing provisions under Section 92 of the Income Tax Act apply. Keep arm's-length pricing documentation from the start.
- Missing the LUT filing for zero-rated exports — Without a Letter of Undertaking filed with GST authorities, the company must pay IGST on exports and then claim refunds. This ties up working capital for months.
- Not registering with RCMC — Registration Cum Membership Certificate with the relevant Export Promotion Council (like the Spices Board or Apparel Export Promotion Council) is needed for certain export benefits.
How Beacon Filing Helps
Beacon Filing manages the full registration process for UAE-based business owners, including coordination with the Indian Embassy in Dubai for document attestation. We handle IEC registration, GST enrollment, and AD Code setup so the company is export-ready from day one.
Our ongoing compliance packages cover MCA filings, GST returns, and RBI reporting — calibrated for the import-export sector.