Indian investors operating out of the UAE may find it harder to claim tax treaty benefits following a recent ruling by the Supreme Court of India, tax experts have warned.
The judgment, delivered in the high-profile Tiger Global–Flipkart tax case, signals that holding a tax residency certificate alone may no longer be sufficient to secure relief under India’s double taxation agreements.
Residency Certificate No Longer Enough
In its ruling, the court held that capital gains from the $1.6-billion exit by US private equity firm Tiger Global from Flipkart were taxable in India, denying benefits under the India–Mauritius Double Taxation Avoidance Agreement despite the presence of a valid tax residency certificate.
Tax professionals say the reasoning in the judgment—particularly around “liable to tax”, commercial substance and effective management—could also influence how authorities interpret the India–UAE Double Taxation Avoidance Agreement.
Experts say this could significantly affect Indian high-net-worth individuals (HNIs), family offices and businesses that have set up entities in Dubai or Abu Dhabi to benefit from favourable tax rules.
Greater Focus on Commercial Substance
According to tax advisers, the ruling makes it clear that a residency certificate may now be treated as a necessary but not sufficient condition for claiming treaty benefits.
Authorities could examine whether a company or investor genuinely operates from the claimed jurisdiction, including where management decisions are taken and where real business activity occurs.
This is particularly relevant in the UAE, where individuals historically paid little or no personal income tax, although the country has introduced a 9% corporate tax on profits above AED 375,000.
Entities operating in UAE free zones, which sometimes offer zero-tax regimes, could therefore face greater scrutiny if they cannot demonstrate meaningful economic activity.
Dubai-Based Structures Under the Scanner
In recent years, many Indian entrepreneurs and family offices have shifted operations to the UAE, attracted by its tax efficiency, global connectivity and business-friendly regulations.
However, tax advisers warn that some cross-border structures may now face closer examination—especially where a Dubai-based entity sits between foreign suppliers and Indian businesses without a clear commercial purpose.
Under India’s Place of Effective Management (POEM) rules, a company incorporated abroad may still be treated as an Indian tax resident if its key management and strategic decisions are effectively taken in India.
Impact on Family Offices and HNIs
Experts say the ruling could particularly affect family offices managing large investment portfolios but operating with limited staff and infrastructure abroad.
If such entities invest in India while being based in low-tax jurisdictions without substantial commercial operations, tax authorities may question their eligibility for treaty benefits.
UAE Remains a Popular Destination
Despite potential tax challenges, the UAE continues to attract wealthy Indians relocating abroad.
Data from Henley & Partners estimates that about 5,100 Indian millionaires left the country in 2023, followed by 4,300 in 2024 and roughly 3,500 in 2025, with the UAE emerging as a top destination.
Advisers say legitimate commercial structures should withstand scrutiny, but entities created mainly for tax advantages may face tougher questions from Indian tax authorities going forward.
