Running an India Business from Dubai: PE and POEM After Hyatt

Running an India business from Dubai raises two tax questions about the Dubai company itself: whether it has a fixed place permanent establishment (PE) in India because of the control it exercises there, and where it is actually resident. Both turn on who makes decisions and where. Residence is tested for each tax year, so the board, signing and reporting arrangements a group runs before 31 March 2027 will decide its position for 2026-27, the first tax year under the Income-tax Act 2025.

Running an India business from Dubai: the two questions

This piece is for the founder, CFO or group general counsel of a group led from Dubai, including Indian promoters who have moved there. The Indian subsidiary is taxed in India in any case. The questions here concern the Dubai company.

Treaty rates and the TRC process are in our India–UAE tax treaty guide. Service PE, dependent agents and employer-of-record risk are in our PE and employer-of-record insight. This piece does not repeat them.

Question (a): the Hyatt markers of control

In Hyatt International Southwest Asia Ltd v ADIT (2025 INSC 891, 24 July 2025), a Dubai (DIFC) company provided strategic oversight to two Indian hotels owned by an Indian company. The Supreme Court affirmed a fixed place PE under Article 5(1) (para 24). It called the test “a fact-specific inquiry” into the right of disposal, “the degree of control and supervision exercised”, and any “ownership, management, or operational authority” (para 15).

The facts the Court relied on give a Dubai headquarters a practical list of markers:

Three further points matter for a group with an Indian subsidiary:

• A separate Indian company does not settle it. The taxpayer said daily operations were run by a separate Indian company. The Court said “legal form does not override economic substance in determining PE status” (para 19).
• No designated office is needed. The “absence of an exclusive or designated physical space” did not help (para 17). Temporary or shared use of space was enough where business was carried on through it.
• There are limits. The Court distinguished E-Funds, where an Indian subsidiary “merely provided back-office support” at arm’s length, “with no involvement in core business functions” (para 20). It stressed that Hyatt’s role “was not confined to high-level decision making, but extended to substantive operational control and implementation” (para 22). A Dubai parent that sets strategy through the Indian subsidiary’s own board presents different facts, which the Court did not decide.

Hyatt is a fixed place case. The nine-month service PE test in Article 5(2)(i) is unchanged; para 21 uses that provision only to say that presence is judged in aggregate. The treaty also lists “a place of management” as a PE (Art 5(2)(a)), which the Court did not consider. The four 2025 tribunal orders we found applying Hyatt concern aircraft lessors under the India–Ireland treaty, and none found a PE (Sunflower Aircraft Leasing, ITAT Mumbai, 13 August 2025, paras 30–33; followed in Sky High XLIII, Kosi Aviation and Sky High LXXIX). We have not identified a later reported judgment applying Hyatt to a comparable UAE management arrangement (searched to 29 October 2026).

Question (b): where the Dubai company is resident

Three tests apply. They do not ask quite the same thing.

POEM in India

CBDT’s 2017 guidance on POEM (Circular 6 of 2017, which we have read in the official Hindi text, with the English wording taken from a reproduction) treats POEM as substance over form, decided year by year. For a company with an active business outside India, it presumes POEM is outside India if most board meetings are held outside India. A company has an active business outside India only if its passive income is not more than 50% of its total income, and less than 50% of its total assets, of its employees (situated or resident in India) and of its payroll expenditure is in India (para 5(a)). Each limb is tested on the average of the data for the year and the two years before it (para 7.2). Where the board stands aside and its powers are exercised by the holding company or a person resident in India, the guidance treats POEM as being in India. A board that follows general, group-wide policies set by the parent, for example on payroll, accounting, HR or IT, is not for that reason standing aside (para 7.1). Decisions on matters reserved for shareholders under company law are not relevant, unless the shareholder in effect removes the board’s real authority to decide (para 8.2(f)). One example treats a parent’s approval of contracts above INR 10 lakh as a sign that management may have been usurped, even though most board meetings were held outside India. For other companies, the guidance asks who actually makes the key decisions and where. Formal meetings are not conclusive. Where a board routinely ratifies decisions taken by others, POEM is ordinarily where those others decide. Where decisions are taken by video, the place where the decision-makers usually reside may count. For any company, isolated facts, such as one director living in India, are not conclusive.

Circular 6 also sets two safeguards. The Assessing Officer must obtain the prior approval of the Principal Commissioner or Commissioner before starting proceedings to hold a foreign company resident in India on the basis of its POEM (para 11). Any such finding needs the prior approval of a collegium of three Principal Commissioners or Commissioners, which must give the company a hearing before issuing directions (para 11.1).

Circular 8 of 2017 says the POEM provision does not apply to a company with turnover or gross receipts of INR 50 crore or less in a financial year. Both circulars were issued under the 1961 Act. They continue so far as they are consistent with the 2025 Act (s.536(2)(j)), which the CBDT’s transition FAQ confirms for circulars generally (Q1.20). We found no new POEM circular under the 2025 Act.

The consequence is large. A foreign company resident in India is taxed on its worldwide income, and the First Schedule rate for a company other than a domestic company is 35% before surcharge and cess (Finance Act 2026, First Schedule Part I-B, Paragraph E; s.2(46), Income-tax Act 2025). That is our reading of the statute; we found no ruling applying it to a company resident by POEM.

Section 220 of the 2025 Act, which replaces s.115JH of the 1961 Act, deals with a foreign company that becomes resident in India for the first time. It lets the Central Government notify exceptions, modifications and adaptations to the rules on computing total income, unabsorbed depreciation, set-off and carry-forward of losses, collection and recovery, and anti-avoidance (s.220(1)). If a notified condition is later breached, the relief is deemed wrongly allowed and the income can be recomputed (s.220(3)). The notification issued under s.115JH (Notification 29/2018, S.O. 3039(E), 22 June 2018) sets rules for the opening written-down value of assets and for brought-forward losses and unabsorbed depreciation, and allows relief for foreign tax. It keeps the company a foreign company for other purposes, so the foreign-company rate continues to apply (paras E and F). It appears to continue under the 2025 Act so far as it is not inconsistent with it (s.536(2)(j)). We have not located a notification issued under s.220.

The UAE treaty test: “wholly”

A company resident in both States is treated as resident where its POEM is (Art 4(4)). That tie-breaker applies only to a company that is first a UAE resident under Article 4(1). A Dubai company whose management and control is partly exercised from India risks falling outside Article 4(1)(b), because it is not managed and controlled “wholly” in the UAE. Individual decisions taken in India do not by themselves show that the company’s overall management and control is outside the UAE. If it does fall outside, on our reading it would have no UAE treaty residence, and India could apply its domestic rules in full, including the wider business-connection rule (s.9(9), Income-tax Act 2025). In Hyatt the Supreme Court proceeded on the undisputed basis that the company was a UAE tax resident under Article 4 (para 8); it did not decide residence. We found no ruling on this point.

The UAE certificate does not resolve it. A treaty TRC goes to a person “who meets the conditions of tax residency in the State pursuant to the relevant International Agreement” (Art 2(1), Ministerial Decision 247 of 2023), so the application itself engages Article 4(1)(b). We found no FTA statement on how it applies the word “wholly”. The Supreme Court has also held that a TRC is an “eligibility condition”, not “sufficient” evidence of residency (Tiger Global, 2026 INSC 60, para 37). Substance is covered in our holding-jurisdiction insight, and the filing in our Form 41 insight.

UAE effective management

A UAE-incorporated company is a UAE Resident Person whatever happens in India (Art 11(3)(a)). A foreign-incorporated company is resident if “effectively managed and controlled in the State” (Art 11(3)(b)). The FTA’s guide looks to where “key management and commercial decisions … are in substance made”, typically by the board, but also to controlling shareholders, delegates and where directors and executives live. It adds that “there can only be one place of effective management and control at any one time”, and that board members need not be UAE-resident (s.5.3.2, General Corporate Tax Guide). Where a treaty applies, its residence rules “take precedence” (s.5.3.4).

The founder’s personal residence is a separate test; see our UAE tax residency guide for individuals.

Governance checklist

Worked example: CEO in Dubai, CFO in India

Facts (illustrative). DubaiCo is a DIFC company owned by an Indian promoter family. The founder-CEO has lived in Dubai since 2024. DubaiCo owns all of IndCo, an operating company in Pune. In tax year 2026-27 DubaiCo’s turnover is INR 140 crore: INR 20 crore of management fees from IndCo, charged at 4% of IndCo’s revenue, and INR 120 crore from contracts with Gulf customers. Its profit is INR 30 crore. Most of its assets, staff and payroll are outside India. Its board has three directors: the CEO, an independent director in Dubai, and the group CFO, who is also IndCo’s CFO and lives in Mumbai. The board meets quarterly in Dubai; the CFO joins by video. Every DubaiCo contract above USD 250,000 needs the CFO’s approval, which he gives from Mumbai; the CEO then signs in Dubai. Nearly all DubaiCo’s customer contracts exceed that amount. Two DubaiCo managers spend about ten days a month at IndCo’s Pune office, setting prices and approving senior hires.

(a) PE. The fee is revenue-linked (Hyatt, paras 12.3, 22). In Hyatt that was one factor alongside control rights, staff placement and activity through the hotel premises, so replacing it with a fixed fee would not by itself remove the PE exposure. DubaiCo’s managers work from IndCo’s premises and exercise pricing and staffing control (paras 16–17), and their visits are assessed together (para 21). IndCo’s separate existence does not answer the point (para 19). There is a real risk that the Pune office is treated as at DubaiCo’s disposal, making it a fixed place PE, with the profits attributable to it taxable in India (Art 7(1)).

(b) Residence. Turnover exceeds INR 50 crore, so Circular 8 does not take DubaiCo out. DubaiCo can rely on the Circular 6 presumption only if it passes all four limbs of the active-business test (passive income, assets, employees and payroll) on figures averaged over 2026-27 and the two preceding years. The facts given suggest it may, but the nature of its income and the historical figures must be checked. If it passes, and with most board meetings in Dubai, the presumption is a starting point. But the key commercial decisions, approving the contracts that make up most of DubaiCo’s business, depend on approval given from Mumbai. That resembles the circular’s contract-approval example, where the guidance says management “may have been usurped”. On our reading, there is a real risk that these decisions are “in substance” made in India (s.6(10)(b)). If DubaiCo’s POEM is in India, India taxes its worldwide income. As a simple illustration, on an assumed taxable total income of INR 30 crore (not accounting profit), tax at 35% is INR 10.5 crore before surcharge and cess. Adjustments in computing total income, losses, foreign tax credit and the s.220 treatment would change the figure. DubaiCo also remains a UAE Resident Person by incorporation. And if the approvals from Mumbai mean it is not managed and controlled “wholly” in the UAE, on our reading it may be unable to rely on the treaty against either Indian claim.

What would change the analysis. Contract approval moves to a person or committee based outside India. The CFO advises but does not approve DubaiCo’s contracts. IndCo’s own management decides its prices and hires. The fee becomes an arm’s-length charge for defined services. Visits are logged and limited to oversight. None of this guarantees an outcome, because both tests turn on what happens in practice.

Common questions

Does a Dubai board meeting make a company resident in Dubai for Indian tax?

Not on its own. CBDT’s 2017 guidance gives a presumption only for a company with an active business outside India, and not where the board stands aside while the holding company or a person resident in India exercises its powers.

Does Hyatt mean every Dubai headquarters has a fixed place PE in India?

No. The Court called the inquiry “fact-specific” (para 15), relied on a 20-year contract, enforceable operational control and revenue-linked fees, and distinguished E-Funds (para 20).

What is POEM in India for a foreign company?

The place where key management and commercial decisions for the company as a whole are, in substance, made (s.6(10)(b)). If it is in India in a tax year, the company is resident in India for that year.

Does POEM apply to a small Dubai company?

CBDT Circular 8 of 2017 says the provision does not apply where turnover or gross receipts are INR 50 crore or less in a financial year. It continues under the 2025 Act so far as consistent with it (s.536(2)(j)).

Can a Dubai company lose the India–UAE treaty if some decisions are taken in India?

There is a risk, but it is not automatic. Article 4(1)(b) requires management and control “wholly” in the UAE, and individual decisions taken in India do not by themselves show that overall management and control is outside the UAE. We found no ruling on the point.

Did Hyatt change the nine-month service PE rule?

No. Hyatt is a fixed place PE decision under Article 5(1). The nine-month test in Article 5(2)(i) is unchanged.

Points to review

• Decision map. For each entity, who makes the key management and commercial decisions, and where they are when they make them (s.6(10)(b)).
• Board practice. Where meetings are held, where each director is, and whether the minutes show real decisions rather than ratification.
• Authority matrix. Strategic and commercial decisions, including contract approvals, are actually taken by the Dubai company’s authorised management in Dubai.
• Intra-group contracts. Scope, term, fee basis and any rights over the Indian company’s staff, pricing, premises and bank accounts, tested against Hyatt paras 16–22.
• Travel log. Days, purpose and premises for every visitor from the Dubai company, kept separately for each entity and project.
• Treaty residence. Whether management and control is “wholly” in the UAE, checked before the Dubai company applies for a TRC or relies on the treaty.

Sources

1. Hyatt International Southwest Asia Ltd v Additional Director of Income Tax, 2025 INSC 891, Civil Appeal No. 9766 of 2025, 24 July 2025. Supreme Court of India. https://www.sci.gov.in [CASE-Tax_Hyatt-International_SC_2025-INSC-891_24-Jul-2025.pdf]
2. Agreement between India and the UAE for the avoidance of double taxation (signed 29 April 1992), consolidated text including the 2007 Protocol (S.O. 2001(E), 28 November 2007), Arts 4, 5, 7. Income Tax Department. https://www.incometaxindia.gov.in/w/uae-comprehensive-agreements-1 [TAX-DTAA_UAE.html]
3. Income-tax Act 2025, s.6(10). Income Tax Department, retrieved 29 October 2026. https://www.incometaxindia.gov.in/w/section-6-1 [ITA2025_s6.txt]
4. Income-tax Act 2025, s.2(42), (46). Income Tax Department, retrieved 29 October 2026. https://www.incometaxindia.gov.in/w/section-2-1 [ITA2025_s2_excerpt.txt]
5. Income-tax Act 2025, s.9(9). Income Tax Department, retrieved 29 October 2026. https://www.incometaxindia.gov.in/w/section-9-1 [ITA2025_s9.txt]
6. Income-tax Act 2025, s.536(2)(j). Income Tax Department, retrieved 29 October 2026. https://www.incometaxindia.gov.in/w/section-536-1 [ITA2025_s536.txt]
7. Finance Act 2026, s.3(1) and First Schedule Part I-B, Paragraph E. Gazette of India, CG-DL-E-31032026-271439. https://egazette.gov.in [Finance Act 2026.txt]
8. FAQs on Interplay and Transition from the Income Tax Act, 1961 to the Income Tax Act, 2025, Q1.20. Central Board of Direct Taxes. https://www.incometaxindia.gov.in (exact URL not recorded) [GIFT_CBDT_FAQ_TRANSITION.txt]
9. CBDT Circular No. 6 of 2017, Guiding Principles for determination of Place of Effective Management, 24 January 2017 (F. No. 142/11/2015-TPL). Central Board of Direct Taxes. Read from the official Income Tax Department Hindi text on 30 October 2026 (https://www.incometaxindia.gov.in/hi/w/circular-no.-6/2017-guiding-principles-for-determination-of-place-of-effective-management-poem-of-a-company); English wording from a secondary reproduction [LAW-Tax_CBDT-Circular-06-of-2017_POEM_OFFICIAL-Hindi-page_paras-5-7.2-11_EXTRACT.txt; LAW-Tax_CBDT-Circular-06-of-2017_POEM-guiding-principles_24-Jan-2017_EXCERPT.txt]
10. CBDT Circular No. 8 of 2017, 23 February 2017 (POEM: turnover of INR 50 crore or less). Central Board of Direct Taxes. Official copy not reached on 30 October 2026; text read from a secondary reproduction [LAW-Tax_CBDT-Circular-08-of-2017_POEM-turnover-50-crore_23-Feb-2017.txt]
11. The Authority for Advance Rulings (Income Tax) v Tiger Global International II Holdings, 2026 INSC 60, 15 January 2026, para 37. Supreme Court of India. https://www.sci.gov.in/sci-get-pdf/?diary_no=12512025&type=j&order_date=2026-01-15&from=latest_judgements_order [CASE-Tax_Tiger-Global_SC_2026-INSC-60_15-Jan-2026.pdf]
12. Sunflower Aircraft Leasing Ltd v ACIT, ITA 1107/Mum/2025, ITAT Mumbai ‘I’ Bench, 13 August 2025. Income Tax Appellate Tribunal. https://itat.gov.in (text read from a reproduction of the order; ITAT copy not checked) [CASE-Tax_Sunflower-Aircraft-Leasing_ITAT-Mumbai_ITA-1107-Mum-2025_13-Aug-2025_IndianKanoon.txt]
13. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended (Arts 3, 11). UAE Ministry of Finance (English text marked “not an official Translation”). https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf [GIFT_UAE_CT_DECREE_LAW_47_2022_CONSOL.pdf]
14. General Corporate Tax Guide (CTGGCT1), ss.5.3.2 and 5.3.4. UAE Federal Tax Authority, September 2023. https://tax.gov.ae/DataFolder/Files/Guides/CT/CT%20General%20Guide%20-%20EN%20-%2010%2009%202023.pdf [not in client folder]
15. Ministerial Decision No. 247 of 2023 on the Issuance of Tax Residency Certificate for the Purposes of International Agreements, Art 2. UAE Ministry of Finance, in effect from 1 March 2023. https://mof.gov.ae/wp-content/uploads/2023/10/Ministerial-Decision-No247-of-2023-on-the-Issuance-of-Tax-Residency-Certificate-for-the-Purposes-of-International-Agreements.pdf [not in client folder]
16. Income-tax Act 2025, s.220. Income Tax Department, retrieved 30 October 2026. https://www.incometaxindia.gov.in/w/section-220-77 [ITA2025_s220.txt]
17. CBDT Notification No. 29 of 2018, S.O. 3039(E), 22 June 2018 (issued under s.115JH of the Income-tax Act 1961), paras A, E and F. Central Board of Direct Taxes. https://www.incometaxindia.gov.in/documents/d/guest/notification29_2018-pdf (official PDF read in part) [LAW-Tax_CBDT-Notification-29-of-2018_SO-3039E_s115JH-foreign-company-POEM_22-Jun-2018_PARTIAL.txt]

Related insights

• India–UAE tax treaty: a guide for businesses – treaty rates, the TRC and the Hyatt summary.
• Permanent establishment risk and employers of record – service PE, agents, secondees and what a PE costs.
• Form 10F and Form 41: tax residency certificates in India – how a treaty claim is filed.
• Choosing a holding company jurisdiction – substance and anti-abuse tests for a holding company.
• Singapore vs UAE to hold an Indian investment – how India tests each, including the POEM risk.
• UAE tax residency and TRCs for individuals – the founder’s own residence.
• India–UAE business structuring – setting up the operating and holding layers.

Disclaimer: This article is general information, not tax or legal advice; rules change, so check the current position and take advice on your facts before acting.