Discovering the Migration Trend: Exploring why Startups in India are Moving to Dubai

The migration trend of startups in India to Dubai has been on the rise in recent years. This is due to the attractive opportunities that Dubai offers, such as access to a larger market and potential investors, as well as its lenient tax laws. Moreover, the Golden Visa program has also been a major factor in this migration trend, giving startups access to all kinds of benefits if they set up their business in Dubai. In this article, we will explore why startups in India are moving to Dubai and what advantages they can gain from it.

The Golden Visa Program:

The Golden visa is a long-term residence permit that allows foreign nationals to dwell in the UAE, work there, or study there while also receiving special perks. The Golden visa is open to people who are innovators in humanitarianism, business owners, scientists, exceptional students and graduates, and frontline heroes.

The founder of a mid-stage fintech business situated in Bengaluru was urged by his tax advisor to consider moving to Dubai on a "golden visa" about three months ago. The advisor claimed that move would enable the entrepreneur make significant savings on tax payouts.

The businessman declined, at least temporarily, on the grounds that he needed to be in India to maintain his enterprise. However, there are other Indian tech entrepreneurs that are following similar path. In my network, a few unicorn entrepreneurs have applied for golden visas.

An entrepreneur who asked to remain anonymous uttered that tax advisory firms here in India are urging founders to relocate to Dubai, particularly if they are close to liquidity and exits. The entrepreneur did not want his investors to think he had the option of leaving India and giving up on his startup.

According to investors, attorneys, consultants, and entrepreneurs communicated on the condition of anonymity and who claimed to represent at least half a dozen well-known Indian tech startup founders and many investors, Dubai is swiftly developing into India's proxy tech capital.

Most of these people have immigrated via the golden visa programme, which provides five- and 10-years residency to investors, entrepreneurs, researchers, medical experts, and excellent students, among others. They were attracted by tax reliefs and a welcoming policy climate.

According to government statistics, at least 44,000 people have entered Dubai using a golden visa since it was introduced in 2019.

The talent pool in India is once again acknowledged. India is again seen as a centre for outsourcing due to the antagonistic attitude of the government, even if that shouldn't have been the case this time. At least 50 business owners from the Web3 cryptocurrencies and digital currencies are thought to have relocated to Dubai.

If this pattern persists, it may have long-term effects for India, particularly on the startup ecosystem there, which was gradually developed over the previous decade and is now one of the top 20 global startup hubs.

Pranav Pai, founding partner and chief investment officer at early stage VC firm 3one4 Capital, which has recently seen some of its portfolio founders move out, predicted that "we will see continuation of value creation by Indians outside of India; people and domiciles will not be in India, so tax collections on income and listings can reduce."

""India has seen significant VC and PE capital inflow over the last five years. However, this money has stopped coming to India because of foreign corporations. In addition, we are losing billions of dollars in foreign exchange.

The governments of Dubai and Abu Dhabi have actively reached out to Indian entrepreneurs and offered them free or heavily discounted office spaces and investments in their businesses in an effort to position themselves as desirable locations for tech enterprises.

For instance, Alpha Wave Incubation (formerly Falcon Edge), a $300 million early stage fund anchored by ADQ, the state-owned holding company for Abu Dhabi's non-oil sectors, requests that its investee companies establish a base in the UAE and offers benefits like golden visas and reduced hiring costs.

On condition of anonymity, a tech consultant said, "If you meet a notable Indian founder, chances are he or she has a golden visa or has been promised one." Even Kunal Shah and Vijay Shekhar Sharma have golden visas, which is how they were able to travel to Dubai during the pandemic.

According to people in the industry, the majority of Indian business people who have a golden visa or have changed their base of operations are reluctant to discuss it publicly out of concern for the Indian government's retaliation. According to a VC who also requested anonymity, "many Indian entrepreneurs who are moving to Dubai or have a golden visa from there don't want this to be recognised publicly because of probable consequences from the government."

Byju Raveendran, the founder and CEO of the ed-tech Indian unicorn Byjus, and Ritesh Agarwal, the founder and CEO of Oyo, which is backed by SoftBank, are two notable Indian businessmen who, according to several reports, have relocated their bases to Dubai. Both businesses rejected these actions.

According to a Byju's spokeswoman, "The founders hold long-stay visas from several countries and have no intention to relocate base from India." A representative for Oyo stated, "Ritesh also has no assets or tax obligations in the UAE. Of course, OYO has interests in a number of nations, including the UAE, and it actively promotes bilateral relations between India and the UAE. Oyo and Ritesh will continue to be proud corporate and individual citizen of India.

According to numerous sources, at least one of the three founders of the online stock trading platform Upstox and the creators of the B2B business Fashinza, Pawan Gupta and Abhishek Sharma, have also moved to Dubai.

Several partners at the venture capital firms Sequoia Capital and Iron Pillar have relocated to Dubai in the previous 12 to 24 months, according to industry insiders. A person acquainted with the situation said that the early stage venture capital firm Accel India has established an incubation programme in Dubai and may be sending two of its employees there.

Benefits for Startups in Dubai

Wealthy engineers are migrating to Dubai from India in large part due to the complete exemption from personal income tax and the low capital gains tax. The personal income tax rate in India is 30% on income over 15,00,000 rupees ($19,300), with a maximum rate of 42%, including a surcharge and a 10%–20% long-term capital gains tax.

Punit Shah, managing partner at venture debt firm Alteria Capital, said: "Founders (in enterprise tech) can have a company outside India and book revenues into that entity without touching Indian borders, while the service they provide can be remote, as it doesn't affect quality, and this makes it easier to onboard clients and manage currency volatility." "Funds from the Middle East have also demonstrated a great interest in investing in startups and having a base nearby, [as it] assists in developing relatability over time."

The unfavorable laws governing cryptocurrencies and Web3 in India are another factor contributing to this tendency. India now levies a 30% tax on any cryptocurrency-related revenue, and starting in July, it will also impose the first-ever global 1% transaction fee on the transfer of digital assets. In addition, double taxation on employee stock ownership plans (ESOPs) — both at the time of exercise and liquidation — has been a problem for Indian business owners, making it challenging to recruit and keep talent.

In contrast, there is no personal income tax in the UAE. Additionally, Dubai has improved the atmosphere for cryptocurrency businesses by passing a law in March 2022 and establishing the Dubai Virtual Assets Regulatory Authority.

According to Taimur Malik, a lawyer at the legal firm Clyde & Co., some VC firms located in the UAE are increasingly demanding that the holding companies of their portfolio businesses be based in the region. Taimur Malik assists entrepreneurs with company structures in the UAE. International entrepreneurs frequently choose to register their holding corporations in Dubai International Financial Centre and the Abu Dhabi Global Market, two free economic zones. Startups have the opportunity to grow into the Middle East and Africa by being in the UAE.

Since Dubai offers a higher standard of life, having operations there also makes it simpler for Indian entrepreneurs to acquire international talent, according to Malik. Since firms may engage tech diaspora workers and urge them to go to Dubai rather than operate out of Bengaluru or Gurugram, he said, "talent acquisition is a significant element here." According to reliable sources, between 8,000 and 10,000 individuals of the Indian startup ecosystem—including employees, founders, and investors—moved to Dubai in the past two years.

Steps to Get a Work Visa in Dubai

To obtain a work visa in Dubai, you will need to follow these general steps:

1.Secure a job offer from a Dubai-based employer: You need to have a job offer before you can apply for a work visa. You can search for job openings on job boards or apply directly to companies in Dubai.

2.Obtain a work permit: Your employer will need to apply for a work permit on your behalf from the Ministry of Human Resources and Emiratisation (MOHRE).

3.Apply for an entry visa: Once your work permit is approved, your employer will provide you with a copy. You can use this copy to apply for an entry visa to Dubai from the UAE embassy in your home country or through an approved typing center.

4.Undergo medical testing: Before you can obtain a residence permit, you will need to undergo a medical test for tuberculosis and HIV/AIDS at a government-approved medical center in Dubai.

5.Obtain a residence visa: After you pass your medical test, your employer will apply for a residence visa on your behalf from the General Directorate of Residency and Foreigners Affairs (GDRFA).

6.Get your Emirates ID card: After your residence visa is issued, you will need to apply for an Emirates ID card, which is a mandatory identity card for all residents in Dubai.

Note: The visa application process and requirements may vary depending on the type of work visa you are applying for and your nationality. It's always best to check with the relevant authorities or a visa consultant for the most up-to-date information.