Indian passport holders abroad will have to pay taxes to Indian govt

Dubai is known as one of the world’s most global cities and offers a plethora of business opportunities to individuals and helps enterprises of all sizes in expanding their horizons.

Indian passport holders abroad will have to pay taxes to Indian govt
Indian passport holders abroad will have to pay taxes to Indian govt

India: Dubai is known as one of the world’s most global cities and offers a plethora of business opportunities to individuals and helps enterprises of all sizes in expanding their horizons. Various entrepreneurs who want to set up their thriving business seeks to come to Dubai, all credit to its friendly business climate.

People are aware of Dubai’s world-class infrastructure, business support frameworks, and advantageous tax regimes. More foreign entities are eyeing the UAE among Singapore, Hong Kong, Mauritius and others as a focal point for their businesses due to favourable tax conditions and easygoing business. However, various foreigners still have to pay taxes to their home countries due to the taxation policies. For instance, Americans and all US Green Card holders residing in the UAE or anywhere else in the world must continue to file a tax return in their home country every year as per Federal Law.

An American expatriate living in Dubai or the UAE, who earns more than $12,550 (as of 2021) anywhere in the world is required to file a US federal tax return and pay taxes as per the regulations of the Internal Revenue Service, regardless of where in the world they live or where their income originates.

Working as an American citizen in the UAE affects taxes even if they don’t stay for very long. For example, if they earn income while on a short-term assignment, they’ll need to report that income on their taxes in the United States. In other words, all American citizens or residents are required to pay taxes on their worldwide income, except if the USA has a taxation treaty with the host country. It is noteworthy that Canada also has a similar tax rules and regulations.

Although there are many big and economically expanding countries such as India, which do not ask ex-pats to file a federal tax return, even if they generate income outside the country. But, seems like Indian government is now moving on similar path and is expected to implement more strict tax laws.

Currently, Indian entrepreneurs  are turning to Dubai with their business ideas, not just is the environment feasible for businesses to bloom but also because setting up their trade in the Middle-Eastern city enables them to hire global talent and be better connected with other parts of the globe.

Lured by the ease of setting up a business, complete waiver on personal income tax, and a friendlier policy environment, several of India’s tech businesspersons have been emigrating to the UAE using the country’s golden visa program.  However, the ongoing smooth processing of working in Dubai has been hampered by the passing of India’s Finance Bill 2021. Individuals with Indian passports with business interests in  countries such as Qatar, and the UAE may face the possibility of taxation on the earnings they accumulate overseas. This law affect all Indian passport holders doing business worldwide.

As per the India 2021 Union Budget, three amendments have been laid out to its tax regime. These amendments will directly affect Indian passport holders running their successful business in countries like United Arab Emirates on the “residency visas”. On their previously tax-free income, these businessmen will now be taxed in India despite being in a tax-free jurisdiction.

The entire scenario has forced many investment-rich people to seek out new opportunities and most significantly alternative options to protect their wealth and future. As India moves forward with its Finance Bill 2021, and the USA continues to push its taxation policies on global wealth, many are heading towards Plan B.

Anil Kumar- a lawyer baser in Dubai stated that people are eagerly looking for alternative options, and a Plan B to secure their global wealth.

“With such expansions, more HNWIs are trying to find a way out. With this, the Caribbean region has emerged as one of the most efficient for these rich Indians in securing wealth planning and many other business opportunities. Indian passport holders with their businesses in cities like Dubai, Abu Dhabi or Hong Kong are keenly looking towards giving up their citizenship and look for other options,” said Kumar.

Kumar added that the wealthy Indians are giving up their citizenships but retaining all the rights to own property and land with the Overseas Citizens of India (OCI) card.

According to Kumar, the Caribbean region offers the most sought-after Citizenship by Investment Programmes as it is home to the world’s topmost programmes. Most notably, the Citizenship by Investment Programmes of Dominica and St Kitts and Nevis which are ranked as the world’s best in the CBI Index 2022 published by PWM Magazine of Financial Times is now receiving high interest from HNWIs from these countries.

According to Anil Kumar, in order escape hefty taxes implemented by the US on the citizens residing in around the world, the citizens surrender their passports in order to obtain alternative citizenship. But the federal laws makes the process difficult. To surrender citizenship, people have have to undergo complicated procedures, and the law deems people to pay off some future taxes before renouncing their citizenship. They will also have to file the final tax return for the year of the renunciation, which is named a “dual return”.

The entire process causes huge disruption for the investors.

Lawyer Anil Kumar stated that India could also adopt similar procedures after the implementation of the tax strap on its citizens living in various foreign countries. If it happens, Indian investors will have to go through the similar procedure and might also get asked to disclose their global businesses and properties while renouncing their citizenship.

The long-standing programme of Dominica grants citizenship to applicants investing in either Government-approved real estate projects or making a contribution to a Government fund. The Commonwealth of Dominica has proven to be a very popular choice for investors globally. The demand for the programme has witnessed a significant surge in recent years, and the option has been leveraged by wealthy investors from the European Union and the United States. The endless benefits of the Citizenship by Investment Programme of Dominica have lured the HNWIs across the globe. In a world full of chaos, the programme has emerged as an insurance policy for the HNWIs with an assurance of a secure and stable life.

Along with Dominica, the Citizenship by Investment Programme of St Kitts and Nevis has also achieved the huge place among HNWIs for its lifetime benefits and efficient Plan B. It gains huge popularity among the investors as the programme provides stable and secure future. The advantage that they will not have to worry about the uncertainties of like makes its most demandable programme.

Moreover, St Kitts and Nevis allows the investors to start their business in hectic free environment. It provides the perfect platform for wealth planning to the investors and diversify their portfolio worldwide.

Besides benefit of wealth planning and portfolio diversification, the alternative citizenship of Dominica and St Kitts and Nevis provides the opportunity to set up a business in a favourable tax regime after hedging against increased taxes. The taxes are the most important factor for Indian investors to looking alternative options and these Caribbean nations are emerged as one of the best platform because of their favourable tax regime and safe political environment.

The CBI programme of both the countries are also known as the most affordable and fastest route to obtaining second citizenship. The HNWIs have been opting for Dominica and St Kitts and Nevis due to its fast processing. Investors choose both the Caribbean nations due to innumerable benefits, such as the programmes helps individuals to enhance their business beyond the national boundaries of their birth. It opens doors to a wide range of international opportunities, such as the ability to travel to the many countries offering visa-free access to the citizens of the country. This has also assisted many Indian or the investors from other countries to finally travel freely – whether for business or leisure.

Moreover, the low tax rates, family reunification, quality of life, top-notch health and education, domestic well-being, and economic and business opportunities are such significant benefits that HNWIs from India looking to lead a stable life. People who become citizens of Dominica and St Kitts and Nevis after applying for their economic citizenship programme enjoy the same rights as those born in the country. It is included the ability to operate a business or enhance the wealth in the country.

It is worth noting that Dominica scored 61.07 in the Global Rankings of “Ease of Doing Business”, making it one of the most promising business hubs in the region.

While St Kitts and Nevis was ranked 139 among 190 economies in the ease of doing business, according to the World Bank annual ratings.

As St Kitts and Nevis and Dominica are receiving a huge number of applicants for its economic citizenship programme; the governments maintain robust background checks in CBI application procedures. All the applications undergo vigorous, stringent due-diligence procedures through a government-authorized third-party firm. Various significant components, such as reviewing applicants’ financial sources, personal references, identification documents, and criminal history, has included in the due-diligence procedure of Dominica and St Kitts and Nevis. All these aspects ensure that both the countries remains a secure, stable and internationally well-connected country from which to operate a business or settle one’s family,