After the arbitrage

Large Indian multinational groups are taking a fresh look at their UAE structures, and with good reason. As the November 30 registration deadline approaches, the UAE's Domestic Minimum Top-up Tax has begun to bite. Under the OECD's Pillar Two framework, multinational groups with consolidated global revenues of €750 million or more must now pay an effective rate of at least 15% on UAE profits — a marked shift from the emirate's standard 9% corporate rate and the 0% enjoyed by qualifying free-zone income. This is not a blanket tax increase; smaller businesses are untouched. But for the big groups the arithmetic has changed, and because the revenue test applies at the group level, even a modest Dubai subsidiary of a large Indian conglomerate falls within the net. It would be a mistake, however, to write Dubai's obituary. Tax was never the whole story. The proof lies in the India-UAE Comprehensive Economic Partnership Agreement, which has flourished for reasons that have nothing to do with tax arbitrage. Non-oil bilateral trade has crossed $76 billion, growing 17% in a difficult global year, and the two governments now speak of $200 billion in trade by 2032. Indian exporters of gems, machinery, chemicals, and smartphones have used the pact to reach Gulf and African markets through the UAE's ports, finance, and logistics. That is real commerce, built on connectivity, capital mobility, talent, and regulatory predictability. A trading company serving Gulf customers, or a multinational running West Asian operations from Dubai, has every reason to stay. What deserves reassessment are entities whose principal purpose is holding investments, routing transactions, or booking income at a low rate. This is precisely what a global minimum tax is designed to accomplish: to make where profits are booked matter less, and where economic activity occurs matter more. Pillar Two's substance-based carve-out, which shelters returns on payroll and tangible assets, makes the framework deliberately kinder to factories and offices than to letterbox profits. Location decisions will increasingly have to stand on commercial economics. That is healthy — for the global system, and for Dubai itself, whose genuine strengths will now be visible without the tax gloss. The more interesting question is the one India should ask itself: why have so many Indian companies found it useful to place regional headquarters, treasuries, and holding structures abroad in the first place? Tax is only part of the answer. Companies prize easy capital movement, currency convertibility, credible dispute resolution, deep financial services, and the ease with which global executives can operate. As tax rates converge worldwide, competition among jurisdictions shifts to exactly these variables. That is GIFT City's opening — but it will not be seized by devising fresh concessions to counter the UAE. Matching subsidy with subsidy would defeat the purpose of Pillar Two and merely shift the race from one form of giveaway to another. India should reserve its incentives for real activity — plants, R&D, jobs, intellectual property — and make GIFT compete on speed, product depth, and regulatory certainty. The UAE's greatest achievement was never its low taxes. It was building an ecosystem that businesses judged worth moving to, one that a thriving trade pact now demonstrates daily. As the tax differential narrows, India's task is not to imitate yesterday's Dubai, but to compete with today's.