Setting up a UAE company from India: the ODI rules for resident individuals
A resident Indian can own a UAE mainland or free zone company, but the money must go out as overseas direct investment under FEMA, and both countries’ tax rules apply from day one.
Reviewed by Vijay Dhawan, Managing Partner, LexVerge LLP, on · Published
Quick answer
Yes. A resident Indian individual can invest in a UAE operating company under the automatic route of the Foreign Exchange Management (Overseas Investment) Rules, 2022, within the Liberalised Remittance Scheme limit of USD 250,000 a financial year, routed through an authorised dealer bank with Form OI. The company must not be in financial services, and an individual cannot hold ODI in a foreign company that has a subsidiary or step-down subsidiary under the individual’s control. An Annual Performance Report is due by 31 December each year, the shares go in Schedule FA of your ITR, and in the UAE corporate tax is 9% on taxable income above AED 375,000.
Who can invest and how
| Point | Rule for a resident individual |
|---|---|
| Route | Automatic: no prior RBI approval, but the AD bank processes it and the conditions still apply |
| Limit | Within the LRS limit of USD 250,000 per financial year, counted with all other LRS remittances |
| Eligible company | An operating foreign entity with a bona fide business; not engaged in financial services |
| Structure | No ODI in a foreign entity that has a subsidiary or step-down subsidiary where you have control |
| Mainland or free zone | Both are possible; the Indian rules look at the entity and the investment, not the zone |
Holding less than 10% without control in a listed company is portfolio investment, not ODI; most founders setting up their own company are making ODI.
Filings in India
- Form OI through your AD bank when the investment is made.
- Annual Performance Report (APR) by 31 December every year, based on the UAE company’s accounts; where the company is not required to be audited, the APR is certified by a chartered accountant.
- Reporting of any disinvestment, restructuring or change, through the AD bank within the prescribed time.
- Schedule FA in your income-tax return each year, listing the shares and any income from them. Failing to disclose foreign assets can attract the Black Money Act.
The Indian tax risk: place of effective management
A company incorporated in the UAE can still be treated as resident in India if its place of effective management is in India, that is, if key management and commercial decisions are in substance taken here. Then its global profits are taxed in India. A founder who lives in India and runs the UAE company from India needs real management in the UAE: directors, decisions, board meetings and staff there, not only a licence and a bank account.
Dividends from the UAE company are taxable in India in your hands at slab rates.
UAE corporate tax in brief
| Situation | Treatment |
|---|---|
| Taxable income up to AED 375,000 | 0% |
| Taxable income above AED 375,000 | 9% on the excess |
| Small Business Relief (revenue up to AED 3 million) | Can be elected for tax periods ending on or before 31 December 2026; not available to a qualifying free zone person |
| Qualifying free zone person | 0% on qualifying income if substance and other conditions are met; other income taxed normally |
Every company registers for corporate tax and files a return within nine months of its year end, even with no profit. See our UAE corporate tax filing service and UAE company formation.
Frequently asked questions
Can a resident Indian individual open a company in the UAE?
Yes, through overseas direct investment under the automatic route of the FEMA Overseas Investment Rules, 2022, within the LRS limit of USD 250,000 a year and through an authorised dealer bank.
What filings are needed in India after investing?
Form OI when investing, an Annual Performance Report by 31 December every year, reporting of any disinvestment, and Schedule FA in the income-tax return.
Can the UAE company have its own subsidiary?
Not if you hold it as a resident individual and control the subsidiary or a step-down subsidiary. Such a structure needs a different route, usually through an Indian company.
Will my UAE company be taxed in India?
Only if its place of effective management is in India, meaning key decisions are in substance taken here. Dividends you receive are taxable in India in your hands in any case.
What is the UAE corporate tax rate?
9% on taxable income above AED 375,000, with 0% below that; qualifying free zone persons pay 0% on qualifying income if they meet the conditions.
Have a question about this? Ask a chartered accountant, free.
A 15-minute call, no obligation. If it needs a filing, you get a written quote first.
Professional fee shown; government charges at actuals, quoted in writing before you pay. GST at 18% extra.
Setting up in the UAE?
We handle the ODI paperwork in India and the formation and tax registration in the UAE, with one team.
Official references
The statutory sources behind this page. We keep our guidance aligned to them: verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.