Applicability: Annual Return on Foreign Liabilities and Assets is required to be filed by those entities which have received FDI and/or made overseas investments in any of the previous year including the current year. i.e. Entities which have foreign liabilities and assets standing in their balance sheet.
Meaning of Entities: Here the word entities means and includes
(a) Company registered under the Companies Act, 2013.
(b) LLPs incorporated under the LLP Act, 2008.
(c) Others [including SEBI registered Alternate Investment Funds, Partnership Firms, Public Private Partnerships (PPP)]
Due Date: Due date for filing Return on Foreign Liabilities and Assets for FY 2021-22 is 15th July, 2022. It is not necessary that FLA Return is to be submitted on the basis of audited Financial Statements only. If the accounts of the entity are not audited then the FLA Return can be filed on the basis of unaudited/provisional accounts and once the accounts are audited a revised FLA Return can be filed on or before 30th September, 2022, only if there are any changes in the information disclosed in the FLA Return already filed on provisional basis. If there are no changes in the return already filed there is no need to file revised return.
How to file FLA Return: FLA Return can be filed by the entities through the web based interface, Foreign Liabilities And Assets Reporting System (FLAIR) which can be accessed through this weblink https://flair.rbi.org.in/fla/faces/pages/login.xhtml . New users have to register on the portal first to be able to file the FLA Return. Existing users can use their login credentials to file the Return however they have to update their password by clicking on the forgot password button.
What if Accounting period of the entity is different from the reference period i.e. April to March: In case the accounting period of the entity is different from that of the reference period then information should be given for the reference period on the basis of internal assessment.
Penalty for non-filing: In case the company does not file the FLA return within the given time, the company will be liable to pay a penalty of thrice the sum involved in the contravention. In case it is not quantifiable, then a penalty of Rs 2,00,000 will have to be paid by the company. If the contravention is continuing, a penalty of Rs 5,000 per day will have to be paid by the company.
Power of Compounding: The regional offices of RBI have the power to compound contraventions without any limit.
1) If a company did not receive FDI or made overseas investment in any of the previous year(s) including the current year, does it need to submit the FLA Return?
Ans: If the Indian company does not have any outstanding investment in respect of inward and outward FDI as on 31st March of reporting year (i.e. 31st March 2022 for FY 2021-22), the company is not required to submit the FLA Return.
There is nothing related to whether the company has received any FDI or made any overseas investment during the year or not, the fact which matters the most is whether there is any balance of inward or outward FDI standing as on 31st March of the relevant year. If yes, then Return is to be filed & if no then there is no need to file the Return.
2) If a company has only share application money, then is that company supposed to submit the FLA Return?
Ans: If a company has received only share application money and does not have any foreign direct investment or overseas direct investment outstanding as on end-March of the reporting year, then that company is not required to fill up FLA return.
This is because the share application money is received is not considered as investment until the shares are actually allotted to the applicant. For instance, There is a company ‘X’ which is in the process of FPO, and has received the share application money from foreign investors on 29th March, 2022 (i.e. Issue closing date), and the basis of allotment is to be finalized on 02nd April, 2022, since the basis of allotment was not finalized and the shares were not allotted till 31st March, 2022, the company is not required to file FLA Return for such share application money.
3) Is it required to submit Annual Performance Report for Overseas Direct Investment (ODI), if we have submitted FLA Return?
Ans: FLA Return and Annual Performance Report (APR) for ODI are two different returns and monitored by two different departments of RBI. So you are required to submit both the returns if these are applicable for your company.
4) If non-resident shareholders of a company has transferred their shares to the residents during the reporting period, then whether that company is required to submit the FLA Return?
Ans: 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 outward FDI as on 31st March of the reporting year, then the company is not required to submit the FLA Return.
5) If company issued the shares to non-resident on Non-Repatriable basis, whether that company is required to submit the FLA Return?
Ans: Shares issued by reporting company to non-resident on Non-Repatriable basis should not be considered as foreign investment; therefore, companies which have issued the shares to non-resident only on Non-Repatriable basis, is not required to submit the FLA Return.
The reason behind not considering the shares issued on non-repatriable basis as Foreign Investment is that the sale or redemption proceeds of such shares cannot be taken outside India and have to be retained in India, so there is no Foreign Liability or Investment as such which is to be repaid.
6) Whether a Partnership Firm is required to file FLA Return?
Ans: If the Partnership firms, Branches or Trustees have any received any FDI or have made any Overseas Investment which is outstanding as on 31st March of the reporting year, then they are required to obtain a dummy CIN number which will enable them to file FLA Return. If any entity has already generated the dummy CIN number for reporting in previous years, then they should use the same CIN number in the current reporting also. The Dummy CIN can be requested by an e-mail to RBI.
Author Vaibhav Pasrija can be reached at Vpasrija93@gmail.com.
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