Mumbai, Jun 20 (KNN) All Indian resident companies which have received foreign direct investment or have made overseas investment in any of the previous years are required under the Foreign Exchange Management Act (FEMA), 1999 to file annual returns. The Reserve Bank of India has come out with an FAQ on the issue.  

Q1. What will be the consequences in case we do not file the said FLA Return by 15th July, as our accounts are not audited as yet, and we do not wish to file it with unaudited figures. Will there be any imposition of penalty or prosecution initiated against the company by RBI or FEMA? Since nowhere it is mentioned either in the Circular No. 145 dated June 18, 2014 or in the Annex to AP (DIR Series) Circular No. 145 about the penalty or the prosecution, so, can we assume that we can file the same once our accounts are audited without any risk of penalty or other proceedings from the concerned authority in future?

Ans.: 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.

Q2. What information should be reported in FLA return, if balance sheet of the company is not audited before the due date of submission?

Ans.: 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.

Q3. In case where Account Closing Period of the company is different from reference period (end-March), can we report the information as per Account Closing Period?

Ans.: No. Information should be reported for all the reference period, i.e. Previous March and Latest March. 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.

Eligible Companies to Submit the FLA Return

Q4. Which companies are required to submit the FLA Return?

Ans.: 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.

Q5. If a company did not receive FDI or made overseas investment in any of the previous year(s) including the current year, do we 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 end-March of reporting year, the company need not submit the FLA Return.

Q6. 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.

Q7. If the company has not received any inward FDI / made overseas investment in the latest year, do they need to submit the FLA Return?

Ans.: 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 required to submit the FLA Return every year by July 15.

Q8. Whether FLA Return is required to be submitted by Registered Partnership Firms (Registered under Partnership Registration Act) or branches or trustees, who have made Overseas Direct Investment or it is mandatory only for Companies (Registered under Companies Act, 1956)?

Ans.: 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.
Q9. Is it required to submit Annual Performance Report for 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.

Q10. 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 has 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 end-March of reporting year, then the company need not submit the FLA Return.

Q11. 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. (KNN Bureau)