In India, Foreign Direct Investment (‘FDI’) inflows have been witnessing increase every year. Similarly, Indian companies are going global by investing abroad in the recent past.
The importance of FEMA compliances is indispensable considering the fact there are penal consequences in case of non-compliances. The purpose of this article is to inculcate basic knowledge on Annual Compliances specified under FEMA for Indian Companies having FDI and for Indian entities having investments in overseas Joint Venture (‘JV’) and/or Wholly Owned Subsidiary (‘WOS’).
The concept of Annual return on Foreign Liabilities and Assets was notified under the regulations of FEMA Act, 1999. Later, RBI vide notification no- RBI/2010-11/427 A.P. (DIR Series) Circular No. 45 introduced the concept of Foreign Assets & Liabilities Return which is an annual return of all investments made in the company during a financial year, is required to be submitted directly by the Company to the RBI.
What is Annual Return on Foreign Liabilities and Assets?
In order to capture the statistics relating to FDI in a more comprehensive manner as also to align it with international best practices, the RBI has introduced the requirement to file Annual Return on Foreign Liabilities and Assets (‘FLA Return’).
ELIGIBLE COMPANIES TO SUBMIT THE FLA RETURN
The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian companies 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 Liabilities in their Balance Sheets.
However, 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.
While, following companies are not required to submit FLA Return, which are as:
SUBMISSION OF RETURN
RBI has prescribed format of FLA Return as an Excel sheet, which is available on RBI website.
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.
The duly filled form is required to be mailed to firstname.lastname@example.org by July 15 every year from the official email id of any authorized person like CFO, Director, Company Secretary etc. Acknowledgement will be forwarded to the both email ids (sender and mentioned in Contact Details).
Procedure of Filing:-
INFORMATION REQUIRED TO BE REPORTED IN FLA RETURN
If the company’s accounts are not audited before the due date of submission, i.e. July 15, then the FLA Return should be submitted based on unaudited (provisional) account. Once the accounts gets audited and there are revisions from the provisional information submitted by the company, they are supposed to submit the revised FLA return based on audited accounts by end – September.
If Account Closing Period of the company is different from the reference period, then information should be given for the reference period on internal assessment.
PARTNERSHIP FIRMS VIS-À-VIS FLA RETURN
FLA Return is required to be submitted by Registered Partnership Firms (Registered under Partnership Registration Act) as well, if the Partnership firms, Branches or Trustees have any outward FDI outstanding as on end-March of the reporting year, then they are required to send a request mail to get a dummy CIN number which will enable them to file the Excel based 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.
It is also informed that these dummy CIN numbers are provided by RBI for filling the excel based FLA return only and not for any other purpose.
Four important points that one should know about FLA Returns:
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 99145-58709 or via mail at email@example.com