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Impacts of Indian Crypto Firms Relocating to Dubai

An increasing number of Indian cryptocurrency companies are opting to relocate to Dubai, attracted by the emirate’s favorable regulatory environment and the desire to escape India’s high tax regime.

Tax Exodus Amidst Stringent Rules

The migration is seen as a response to India’s stringent tax rules and unclear legal guidelines for digital currencies. The government’s introduction of a 30% tax on cryptocurrency trading profits and a 1% tax on transactions exceeding Rs10,000 in June 2022 has prompted Indian crypto firms to seek more conducive environments.

Dubai’s Allure: Low Taxes and Regulatory Support

Dubai, particularly, has become a preferred destination due to its low taxes, streamlined business establishment procedures, and a dedicated regulatory framework for digital assets. The city has positioned itself as a hub for crypto innovation, benefitting from strategic policies and regulatory support.

Industry Insights: Clarity and Community Support

Web3 founders are increasingly favoring Dubai or Singapore as their hub due to the regulatory clarity and community support offered. The CEO of CoinDCX, Sumit Gupta, notes that investors prefer jurisdictions without last-minute surprises when setting up businesses.

Impact on Trading Volumes in India

High tax rates in India have resulted in a significant decline of more than 90% in crypto trading volumes. While India remains a leader in grassroots crypto adoption, much of the activity is now occurring on alternative channels due to the tax burden.

Contrasting Tax Structures

India’s tax structure includes a 30% tax plus applicable surcharge, a 4% cess on profits from crypto trading, and a 1% tax deducted at source on transactions above Rs10,000. Failure to comply may result in penalties, interest, and potential legal consequences.

UAE’s Proactive Regulatory Environment

The UAE, particularly Dubai and Abu Dhabi, has actively developed a regulatory environment that is both robust and flexible. Initiatives such as the launch of the Virtual Assets Regulatory Authority (Vara) and specialized zones for virtual asset businesses contribute to Dubai’s appeal.

Dubai’s Crypto Hub Status Grows

Dubai’s growing status as a crypto hub is reinforced by initiatives like the DMCC’s Crypto Centre, featuring 550 Web3 companies, with 50 being of Indian origin. The city has actively attracted top crypto talent, offering dedicated free zones and business-friendly benefits.

Regional Crypto Economy Expansion

The Middle East and Africa region have become the sixth-largest crypto economy, recording an estimated $400 billion or 7.2% of the global transaction volume between July 2022 and June 2023, according to Chainalysis.

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