Impact of Supreme Court Ruling on Indian Investors in UAE
Challenges for Indian Investors in the UAE
Recent developments from the Supreme Court of India may complicate the process for Indian investors based in the UAE to claim benefits under tax treaties. Experts in taxation have indicated that the recent ruling in the prominent Tiger Global–Flipkart tax case suggests that merely possessing a tax residency certificate may no longer suffice for availing relief under India's double taxation agreements.
Residency Certificate Insufficient
The court's decision determined that capital gains from Tiger Global's $1.6 billion exit from Flipkart are taxable in India, rejecting benefits under the India–Mauritius Double Taxation Avoidance Agreement, despite the existence of a valid tax residency certificate. Tax professionals believe that the court's reasoning—particularly regarding 'liable to tax', commercial substance, and effective management—could reshape how authorities interpret the India–UAE Double Taxation Avoidance Agreement.
Increased Emphasis on Commercial Substance
Tax advisors assert that the ruling indicates that a residency certificate may now be seen as a necessary but insufficient condition for claiming treaty benefits. Authorities might scrutinize whether a company or investor genuinely operates from the claimed jurisdiction, including where management decisions are made and where actual business activities take place. This is especially pertinent in the UAE, where individuals have historically faced minimal personal income tax, although a 9% corporate tax on profits exceeding AED 375,000 has recently been introduced.
Dubai-Based Entities Under Review
In recent years, numerous Indian entrepreneurs and family offices have relocated to the UAE, drawn by its tax advantages, global connectivity, and favorable business regulations. However, tax advisors caution that certain cross-border structures may now be subject to more rigorous examination—particularly when a Dubai-based entity acts as an intermediary between foreign suppliers and Indian businesses without a clear commercial rationale. According to India's Place of Effective Management (POEM) rules, a company incorporated abroad may still be considered an Indian tax resident if its key management and strategic decisions are made in India.
Consequences for Family Offices and High-Net-Worth Individuals
Experts suggest that the ruling could have significant implications for family offices managing substantial investment portfolios but operating with limited staff and infrastructure abroad. If these entities invest in India while being based in low-tax jurisdictions without substantial commercial operations, tax authorities may challenge their eligibility for treaty benefits.
UAE Remains an Attractive Destination
Despite the potential tax hurdles, the UAE continues to be a favored destination for affluent Indians relocating abroad. Data from Henley & Partners indicates that approximately 5,100 Indian millionaires left the country in 2023, followed by 4,300 in 2024 and around 3,500 in 2025, with the UAE emerging as a leading choice. Advisors maintain that legitimate commercial structures should withstand scrutiny, but entities established primarily for tax benefits may encounter increased questioning from Indian tax authorities in the future.