APR for Dubai and UAE Subsidiaries — What RBI Accepts When There Is No Mandatory Audit

More Indian companies have a UAE entity than most people realise. Some set one up for trading, some for holding purposes, some as a sales office for GCC market access. A significant number set up in DMCC, JAFZA, or DIFC for the tax efficiency and international banking access. And a growing number of Indian founders have a Dubai entity specifically because it gives them a clean, internationally recognised structure for billing international clients.

What many of these companies do not realise — until December is around the corner — is that their UAE entity triggers an Annual Performance Report obligation with the RBI. And the question that follows is almost always the same: the UAE doesn't have a mandatory audit requirement for most companies, so what do we actually need to give the AD bank?

This article answers that question precisely. The APR audit requirement for UAE subsidiaries is one of the most misunderstood areas in FEMA ODI compliance, and getting it wrong is what causes APR rejections — not ignorance of the December 31 deadline, but confusion about what documentation a UAE entity needs to produce to satisfy the RBI.

THE STARTING POINT: WHAT THE RBI REQUIRES FOR APR

The Annual Performance Report is filed under the Foreign Exchange Management (Overseas Investment) Rules, 2022. Every Indian entity that has made Overseas Direct Investment — meaning it holds 10% or more equity with control in a foreign entity — must file an APR for that entity with its AD bank by December 31 every year.

The APR must be filed regardless of whether the UAE entity is profitable, operational, or active. A dormant free zone company with no revenue still requires an APR. The only exemption is where the Indian party holds less than 10% equity without control and has no other financial commitment in the entity.

The Rules require that where the Indian party has control over the foreign entity, the APR must be filed on the basis of the foreign entity's audited financial statements. This is the core requirement that creates the UAE-specific question.

THE UAE AUDIT LANDSCAPE IN 2026 — IT IS NOT AS SIMPLE AS "NO AUDIT REQUIRED"

The common assumption that "the UAE doesn't require audits" was more true a few years ago than it is now. The UAE's regulatory environment has significantly tightened since the introduction of UAE Corporate Tax under Federal Decree-Law No. 47 of 2022, effective from June 2023.

Every free zone company in the UAE must now prepare audited financial statements for any financial year starting on or after 1 June 2023, and most major Dubai free zones — including DMCC, DAFZA, DIFC, JAFZA, Meydan and DDA — require audited accounts to be submitted at licence renewal in 2026.

Even companies in free zones that do not explicitly mandate audit at the authority level (such as IFZA or TECOM) are effectively required to obtain audited accounts in 2026 due to corporate tax law — particularly if claiming QFZP status.

The DIFC has the most rigorous requirements: all registered entities must conduct an external audit using a DIFC-registered auditor, with financial statements filed within six months of the financial year-end.

For Indian companies with UAE subsidiaries, this is actually helpful news for FEMA compliance. If your UAE entity is already required to produce audited financial statements for free zone licence renewal or UAE corporate tax purposes, those audited accounts — prepared under IFRS by a UAE-licensed auditor — are exactly what your AD bank needs for the APR.

THE SPECIFIC SCENARIOS AND WHAT EACH ONE REQUIRES FOR APR

Not every UAE structure is identical. What your AD bank will accept depends on which UAE entity type you have and whether a local audit is already mandated. Here is how each scenario plays out.

Scenario 1: DMCC, JAFZA, DAFZA, DIFC, or ADGM Company

These are the most common free zones for Indian-owned UAE entities. For APR purposes, these are the cleanest situations in 2026 — because all of them either mandate an annual audit (DIFC, ADGM, DMCC, JAFZA, DAFZA) or require audited accounts for corporate tax and QFZP status.

Your UAE-licensed auditor prepares the IFRS financial statements and issues an audit report. IFRS is internationally compatible and requires minimal adjustment for RBI's Form ODI Part II. The audit report, signed by a UAE-registered auditor, submitted alongside the Form ODI Part II, is what your AD bank expects and will accept.

The timing consideration: DMCC, JAFZA, DAFZA, and Dubai South typically require audit submission within 90 days of financial year-end — meaning 31 March 2026 for a 31 December 2025 year-end. DIFC and ADGM allow six months. The RBI's APR deadline is 31 December. For most UAE entities with a calendar financial year, the local audit is due significantly before the APR deadline — meaning the audit should not be the constraint. Start collecting the audited accounts in October for a December filing.

Scenario 2: Offshore UAE Entity — RAK Offshore or Jebel Ali Offshore

This is the scenario that creates the most confusion. Offshore UAE companies — registered through RAK International Corporate Centre or Jebel Ali offshore — are not technically free zone companies. Offshore companies registered in jurisdictions like RAK Offshore or Jebel Ali Offshore typically face lighter audit requirements. However, if these entities conduct business within the UAE or hold assets that trigger economic substance rules, they may still need to provide audited financials.

An Indian company that holds a RAK Offshore entity for holding or trading purposes — without a UAE business activity and therefore without a local audit obligation — is in the situation where the UAE jurisdiction genuinely does not mandate an audit. This is the "no mandatory audit" scenario.

For FEMA ODI compliance purposes and APR filing India requirements, the RBI's position through AD bank practice is this: where the host country does not mandate a statutory audit, the Indian party does not automatically avoid the audit requirement. Although no FEMA/RBI regulation explicitly states that the audit must be conducted by a foreign auditor, AD Banks insist on it because in several past APR/ODI clarifications, RBI raised objections where the foreign entity's audit was performed by an Indian Chartered Accountant instead of an auditor registered in the host country.

The accepted approach for RAK Offshore and similar structures where no local audit is mandated: engage a UAE-licensed chartered accountant firm to prepare and certify the financial statements under IFRS, with the certification specifically stating it is prepared for APR and FEMA compliance purposes. This is not a statutory audit — it is a certification engagement by a UAE-licensed professional. Most AD banks accept this where the Indian party's total financial commitment in the UAE entity is below USD 10 million, provided the certification comes from a properly licensed UAE CA firm and explicitly acknowledges the APR compliance purpose.

The language matters. A certificate that simply says "the accounts are true and fair" is not sufficient. The auditor's certificate should confirm the period covered, the basis of accounting (IFRS), the licensing of the certifying professional, and that the certification is issued for the Indian entity's ODI compliance under FEMA.

Scenario 3: UAE Branch of an Indian Company

A UAE branch is not a separate legal entity — it is an extension of the Indian parent. Foreign investment reporting through APR applies to subsidiaries and JVs where equity has been transferred. A UAE branch that was established through a branch registration — not through equity investment into a UAE-incorporated entity — typically does not trigger the APR obligation in the same way, because there is no equity stake in a foreign entity to report.

However, if the UAE branch has a separate P&L and balance sheet for local regulatory purposes, and the Indian parent has any form of ODI classification for the funds remitted to the branch, the position should be confirmed with the AD bank specifically. Branch structures and their FEMA treatment are fact-specific and require individual assessment.

THE FIRMS PORTAL SUBMISSION — WHAT THE AD BANK DOES WITH YOUR DOCUMENTS

Once you have the audited or certified financial statements of the UAE entity, the APR submission process goes through your AD bank's FEMA desk. The bank reviews the documents, prepares or verifies the Form ODI Part II, and uploads the submission to the RBI's FIRMS portal.

What the AD bank checks in the UAE-entity context specifically:

The financial statements must be in a functional currency — typically AED for UAE entities — with INR equivalents provided at the RBI reference rate for the relevant date. AED to INR conversion at the RBI's published reference rate is the required methodology, not the prevailing rate on your invoice date.

The financial year covered by the audit must match the period required by the APR cycle. The APR filed by December 31, 2026 covers the UAE entity's accounting period ending by March 31, 2026. If your UAE entity has a December financial year, the 2025 audited accounts go into the December 2026 APR.

The UIN — Unique Identification Number assigned by the RBI at the time of the first ODI remittance — must match across all documents. Any change in shareholding since the last APR, any change in the entity's activity, and any guarantee or loan provided by the Indian parent to the UAE entity must be reflected and reconciled.

WHY THE UAE APR IS DIFFERENT FROM US CPA AND UK AUDITOR REQUIREMENTS

For Indian companies with US subsidiaries, the US CPA for APR filing is the licensed professional — an AICPA-member CPA whose report satisfies RBI requirements and AD bank expectations. For UK subsidiaries, a UK auditor for APR filing from ICAEW or ACCA is the standard. Both the US and UK have established, well-understood audit frameworks that AD banks have processed for years.

The UAE is less standardised in this respect because the UAE audit framework is itself newer — corporate tax and mandatory free zone audits only came fully into force in 2023 and 2024. AD banks have variable experience with UAE audit reports, and their internal guidance on what constitutes acceptable UAE audit documentation for APR filing is not as settled as it is for US or UK entities.

This is precisely why the documentation and language of the UAE auditor's certificate matters more for FEMA compliance than in other jurisdictions. An AD bank that has processed hundreds of US CPA audit reports knows what to expect. A bank seeing a UAE CA certification for the first time may ask additional questions or request specific confirmations. Preparing the documentation with this context in mind — and having the UAE auditor's certificate reference both IFRS and the FEMA compliance purpose explicitly — reduces the risk of back-and-forth with the bank before the December 31 deadline.

THE PRACTICAL TIMELINE FOR UAE ENTITIES

For a UAE entity with a December 31 financial year-end — the most common structure — the preparation timeline works as follows:

• By October: Instruct the UAE auditor or CA firm to begin preparation of the IFRS financial statements and audit or certification engagement. For DMCC, JAFZA, and DIFC entities, the local audit may already be in progress for licence renewal purposes — align this with your APR requirement.

• By November: AED to INR conversions using RBI reference rates should be confirmed for the year-end date. UIN reconciliation against the Indian parent's FEMA records should be completed.

• By late November: Draft Form ODI Part II should be reviewed against the UAE audited accounts for consistency. Any discrepancies between the UIN record, the prior APR, and the current year accounts should be identified and resolved before the December submission.

• By first week of December: Complete submission dossier to the AD bank, allowing the bank 3 to 4 weeks to review, upload to FIRMS, and return the acknowledgement before December 31.
  

HOW ACCORP PARTNERS HANDLES UAE APR AUDITS

Accorp Partners conducts APR audits for Indian parent companies with subsidiaries across jurisdictions — including UAE free zone entities, offshore entities, and DIFC-registered companies. Our engagement for UAE entities covers preparation of IFRS financial statements and coordination with UAE-licensed audit or CA firms for the certification engagement, ensuring the language, format, and professional credentials meet what Indian AD banks require.

For Indian companies with UAE entities that have never filed APR or have missing years, Accorp also manages the back-year certification and late submission process, calculating the applicable Late Submission Fee and coordinating the regularisation with the AD bank before new investment or repatriation transactions are initiated.

Learn more about Accorp Partners' APR audit services here:

https://accorppartners.com/services/cpa-services/apr

Frequently Asked Questions

Q: My DMCC company has audited accounts for licence renewal. Can I use the same accounts for the APR?

A: Yes, in most cases. DMCC audited accounts prepared under IFRS by a DMCC-approved auditor satisfy the documentary requirement for APR filing India purposes. You will need to confirm that the accounts cover the correct financial period for the APR cycle, that AED-to-INR conversions are at RBI reference rates, and that the Form ODI Part II is accurately completed against the audited figures. The same audit report submitted to DMCC for licence renewal can support the APR submission to your AD bank.

Q: My UAE entity is a RAK Offshore company with no local audit requirement. What do I submit for APR?

A: Where no statutory audit is mandated in the host country, AD banks typically accept financial statements prepared under IFRS and certified by a UAE-licensed chartered accountant — not a full statutory audit, but a certification engagement by a locally licensed professional. The certificate must explicitly state the basis of accounting (IFRS), the period covered, the licensing of the certifying professional, and that it is issued for ODI compliance purposes under FEMA. This approach is subject to the AD bank's internal policy and satisfaction, so confirm the format with your AD bank's FEMA desk before the audit is commissioned.

Q: My UAE subsidiary is dormant — no revenue, no transactions. Do I still need to file APR?

A: Yes. The APR obligation applies regardless of activity level. A dormant UAE entity in which the Indian parent holds 10% or more equity with control must still have its financials certified and an APR submitted by December 31 every year. For a dormant entity, the financial statements will show nil or minimal balances, and the certification engagement is relatively straightforward — but it cannot be skipped.