Foreign Liabilities and Assets (FLA) refers to a specific reporting system under the Foreign Exchange Management Act, 1999 (FEMA 1999) in India. This reporting system is instituted to collate comprehensive data on foreign liabilities (foreign direct investments or FDI) and assets (overseas direct investments or ODI) of Indian companies. The data collected assists in the analysis and understanding of India’s external economic situation.
Purpose: The primary objective of FLA is to gather exhaustive information about foreign liabilities (FDI into the company) and assets (investments made by the company in foreign entities) of Indian companies. Such a mechanism allows for an accurate understanding of the degree of overseas investment made by Indian entities, and the level of foreign investment attracted by them. This system is implemented under the legal structure of FEMA 1999 and is supervised and regulated by the Reserve Bank of India (RBI).
Applicability: The FLA reporting requirement is mandatory for all Indian entities that have either attracted FDI or made ODI. This is applicable regardless of the quantum or the proportion of the investment, meaning that even a small amount of foreign investment would necessitate compliance. Importantly, both listed and unlisted companies fall under the purview of this requirement, making it a widespread regulatory norm.
Reporting Frequency and Timeline: The FLA reporting mechanism mandates an annual submission of returns. These returns depict the year-end status of the foreign liabilities and assets of the company for the relevant financial year. The timeline for the submission is by July 15th each year, succeeding the end of the financial year on March 31st. For instance, for the financial year that ends on March 31, 2023, the submission of the FLA return should be done by July 15, 2023.
Reporting Process: The FLA return is submitted electronically via an online portal known as FLAIR (Foreign Liabilities and Assets Information Reporting), designed and managed by the RBI. To access and submit the returns, companies need to first register themselves on the FLAIR system.
Information to be Reported: The FLA return requires detailed information pertaining to the company’s foreign liabilities and assets. This includes:
Penalties for Non-compliance: Non-compliance with the FLA reporting requirement can lead to penalties under FEMA 1999. If a company fails to submit the FLA return within the stipulated deadline, it may be subject to penalties that could include monetary fines or other punitive measures as per the discretion of the RBI.
It’s crucial for Indian companies involved in receiving FDI or making ODI to fully comply with the FLA reporting requirement. In order to ensure accurate and timely submission of the FLA return, companies should closely follow the most recent notifications, circulars, and guidelines issued by the RBI.