In Indian Foreign Direct Investment (‘FDI’) has seen drastic growth in the past few years, now Indian Companies looking globally by receiving and investing abroad in the past few years.
The Compliances under Foreign Exchange Management Act, are strict in nature and there are penal consequences in case of non-compliances. The main intention behind this article is to instil general knowledge on Annual Compliances specified under FEMA for Indian Companies having Foreign Direct Investment (‘FDI’) and for the entities having investment in foreign entities like Wholly Owned Subsidiaries (‘WOS’) /Joint Ventures (‘JV’).
The concept of Annual Return on Foreign Liabilities and Assets has been notified under FEMA 1999 and it is required to be submitted by all the India-resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA (A.P. (DIR Series) Circular No. 29, dated February 02, 2017)
The Reserve Bank of India has discontinued the earlier email-based reporting system and replaced by the online web-based reporting for submission of annual FLA (‘FLAIR’) return from June 1, 2019 (i.e., reporting from the 2018-19 round of FLA)
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What is Annual Return of Foreign Liabilities and Assets?
-FLA annual return are one of the compliances that have to be met by the companies that are involved with FDI (Foreign Direct Investments) or companies who invest in foreign companies either via joint venture or wholly owned subsidiaries, also termed as Overseas Direct Investment (ODI).
Eligible Companies
– The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted by the following entities which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who holds foreign assets or/and liabilities in their balance sheets;
- A Company within the meaning of section 1(4) of the Companies Act, 2013.
- A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
- Others [include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP) etc.]
Whether Company has not received any fresh FDI/ODI BUT having outstanding FDI/ODI is required to file FLA
If the company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest year but the company has outstanding FDI and/or ODI, then that company is also required to submit the FLA Return every year by July 15.
Whether a company needs to submit the FLA Return, if it has received only share application money?
If a company has received only share application money and does not have any outstanding foreign direct investment or overseas direct investment as on end-March of the reporting year, then the company is not required to fill-up the FLA return.
Is it required to submit any financial statements like balance sheet or P&L accounts (audited/ unaudited) along with the FLA return?
No balance sheet or profit loss accounts need to be submitted. Only annual return on FLA through online web-based reporting portal needs to be submitted before due date (July 15).
If non-resident shareholders of a company have transferred their shares to the residents during the reporting period, then whether that company is required to submit the FLA Return?
If all non-resident shareholders of a company have transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of inward and/or outward FDI as on end-March of reporting year, then the company need not submit the FLA return.
If company had issued the shares to non-resident on non-repatriable basis, whether that company is required to submit the FLA Return?
Shares issued by reporting company to non-resident on non-repatriable basis is not considered as foreign investment; therefore, such companies are not required to submit the FLA Return.
Applicability of FLA return on partnership firms.
Yes, FLA return is also applicable on partnership firms and required to be submitted by registered partnership firms (registered under Partnership Registration Act) or branches or trustees, who have made overseas direct investment as on end-March of the reporting year, firms are required to send a request mail to get a dummy CIN number which will enable them to file FLA Return. If any entity has already got the dummy CIN number from the previous survey, they should use the same CIN number in the current survey also.
The dummy CIN numbers are provided by RBI for filling the excel based FLA return only and not for any other purpose.
Procedure of filling FLA return .
- As per new concept RBI has notified the web base online filling service and has discontinued the earlier email based filling.
- The FLA return has be submitted on online web based portal, user have to get itself registered as entity user and then click on Registration (New Entity Users).
- After registering fill details in online form.
- Any query regarding filling of FLA return should be sent to surveyfla@rbi.org.in.in. You may also contact RBI person handling FLA return
Format of Authority Letter for Filing of FLA return
On Entity’s Letter-Head
______________________________________________________________________
AUTHORITY LETTER
The Director
Date: xx / xx / xxxx
International Investment Position Division (IIPD)
Department of Statistics and Information Management (DSIM)
Bandra Kurla Complex, Bandra (E), Mumbai
Reserve Bank of India
Dear Sir / Madam
Sub: Letter of Authorization for filing of annual return on FLA
We hereby authorize Shri. / Smt. / Ms.
Name and Designation: ________________
Permanent Account Number (PAN) ____________
to register as Business user for submission of annual return on Foreign Liabilities and Assets (FLA) on behalf of our company/ LLP/ Others named _________
CIN/ LLPIN/ Others-UIN ____________
Registered office at _____________
and having PAN ____________
2. We further confirm that we are liable for and bound by all acts of commission and omission by the authorized representative. All acts committed by the above authorized representative shall be treated as if these acts were committed by the company/ LLP/ Others.
Yours faithfully
(Signature of Managing Director / Director / Head of Institution / Designated Partner in case of LLP / Investment Manager or Sponsor for Investment vehicle)
Name:
Designation:
Date:
Seal of the signing authority:
(After furnishing all details, take print out of this word file of authority letter and get it signed from appropriate authority as mentioned above and then scan it. Convert it to PDF and then upload the same in FLA user registration form)
Format of Verification letter for filing of FLA return
“Name of Company”
Corporate Office / Central Office
VERIFICATION LETTER
The Director
Date xx / xx / xxxx
International Investment Position Division (IIPD)
Department of Statistics and Information Management (DSIM)
Bandra Kurla Complex, Bandra (E), Mumbai
Reserve Bank of India
Dear Sir / Madam
Sub: Verification Letter for CIN / LLPIN / Others UIN (in case of Alternative Investment Fund / Partnership Firm / Public Private Partnership) and PAN of authorised person filing annual FLA form
We hereby authorize Shri. / Smt. / Ms.
Name and Designation: _______________________________
Having Permanent Account Number (PAN)
to register as Business user for submission of annual return on Foreign Liabilities and Assets (FLA) on behalf of our company named ___________
Having CIN / LLPIN / Others UIN
We further confirm that the information provided herein in respect of Name and CIN / LLPIN / Others UIN of entity and PAN of authorised person is correct and the same can be treated as verified by us as per the attached authority letter.
Name and Designation of Signatory on the Entity’s attached authority letter: (Signature not required) _________________________________________
Entity’s Corporate Office Address:
(After furnishing all details, convert this word file of Verification Letter into pdf file and then attach the same in FLA user registration form)
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Disclaimer: The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Authors recommend that professional advice is sought before taking any action on specific issues. The author can be however contacted for further clarification at 85600-29055 or via mail at cs.compliancek@gmail.com
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