Annual return on foreign liabilities and assets

As per RBI/2010-11/427 A.P. (DIR Series) Circular No. 45 dated March 15, 2011, an Indian company which has received FDI and/ or made overseas investment in any of the previous year(s), including current year, shall submit form FLA Return to the Reserve Bank on or before the 15th day of July of each year.

Reason behind the introduction of FLA Return is to capture the statistics relating to Foreign Direct Investment (FDI), both inward and outward in a more comprehensive manner as also to align it with international best practices.

APPLICABILITY TO SUBMIT THE FLA RETURN

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;

1. A Company within the meaning of the Companies Act
2. A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
3. Others include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP) etc.

In following cases, entity are not required to submit FLA Return :

1. If the Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year.
2. 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.
3. 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.
4. Shares issued by reporting company to non-resident on Non-Repatriable basis should not be considered as foreign investment.

TIMELINE FOR FLA RETURN

• The FLA return has to be filed by July 15.
• 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 reference period, then information should be reported on internal assessment basis for the reference period.
• 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.

PROCEDURE FOR SUBMISSION OF THE FLA RETURN AND ACKNOWLEDGEMENT THEREFORE

Earlier, entities filed the annual return on Foreign Liabilities and Assets (FLA) in the soft form which can be duly filled-in, validated and sent by e-mail to the Reserve Bank by July 15 of every year.

The present email-based reporting system for submission of the FLA return will be replaced by the web-based system online reporting portal https://flair.rbi.org.in by RBI/2018-19/226 A.P. (DIR Series) Circular No. 37 dated June 28, 2019 and would be applicable for reporting of information for the period 2018-19 to enhance the security-level in data submission and further improve the data quality.

1. Click on Registration form for New Entity User at https://flair.rbi.org.in.
2. Fill all the details in the FLA User Registration Form.
3. There are three parts in the FLA User Registration Form: (A) Entity Details; (B) Authorized Person's Details; (C) Attachments.
4. Attach Verification letter and Authority Letter from Entity in pdf as per the format given in user manual.
5. Click on Submit button after filling all the details and a message 'Record Saved Successfully' pops up.
6. Enter User Name and Password as provided to the authorised person in the email (provided in FLA user registration Form) and click Login. The user would be asked to change his/her password upon first time Login.
7. Logging on to FLA online form.
8. After filling all the details in Section I, II, III, IV, click on 'Save as Draft', then click on 'Validate Section IV/Proceed to FLA Form Submission.
9. After submission, we will receive the system generated acknowledgement instantly.

CONSEQUENCES OF NON-FILING

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.

COMPOUNDING PROVISIONS

Any person who contravenes any provision of the FEMA, 1999 [except section 3(a)] or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act or contravenes any condition subject to which an authorization is issued by the Reserve Bank, can apply for compounding to the Reserve Bank.

FAQ

Q 1. If the old/new company fails to file the FLA form before the due date; can the company submit the FLA form?

Ans: Yes, company can file the FLA return after due date by taking approval from RBI.

Q 2. If an old/new company wants to file the previous year FLA form; can the company file the previous year FLA form?

Ans: Yes, company can file the previous year FLA form (through online FLA portal only) by taking approval from RBI. For taking approval, they need to send mail to surveyfla@rbi.org.in .

Q 3. What will do, if the company has submitted the FLA form in old format?

Ans: RBI will accept FLA form submitted through online portal only (Old format email-based FLA forms will not be accepted).

Q 4. 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: Yes, 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.

Q 5. How would an acknowledgement be provided to us on submission of the form?

Ans: You will receive the system-generated acknowledgement of FLA data submitted by you at the time of final submission itself. No separate mail will be sent in this regard.

Q 6. What are definitions of 'Foreign Subsidiary' and 'Foreign Associate'?

Ans. Foreign Subsidiary:

An Indian company is called as a Foreign Subsidiary if a non-resident investor owns more than 50% of the voting power/equity capital OR Where a non-resident investor and its subsidiary(s) combined own more than 50% of the voting power/equity capital of an Indian enterprise.

Foreign Associate:

An Indian company is called as Foreign Associate if non-resident investor owns at least 10% and no more than 50% of the voting power/equity capital OR Where non-resident investor and its subsidiary(s) combined own at least 10% but no more than 50% of the voting power/equity capital of an Indian enterprise.

Q 7. What valuation guidelines are used while reporting foreign equity investment for unlisted companies?

Ans: This field will be automatically calculated in online web-based reporting (item 1.1, Section III). Companies are not required to compute it separately. However, for your information, calculation of market value of equity capital for unlisted companies (using the OFBV method) is as follows:

Market value of equity capital held by Non- resident at OFBV for current year/previous year

= (Net worth of the company for current year/previous year) * (% non-resident equity holding for current year/previous year)

Where, Net worth of the company

= (Paid up Equity & Participating Preference share capital of company + Reserves & Surplus - Accumulated losses)

Q 8. What valuation guidelines are used while reporting foreign equity investment for listed companies?

Ans: This field will be automatically calculated in online web-based reporting (item 1.1, Section III). Companies are not required to compute it separately. However, for your information, If the Indian reporting company is listed then closing share price as on reference period, i.e. end-March of previous and current year should be used for valuation of non-resident equity investment.

DISCLAIMER: The information given in this document is based on the analysis and interpretation of applicable laws as on date. The information in this document is for general informational purposes only and is not a legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this document. Under no circumstances whatsoever, we are not responsible for any loss, claim, liability, damage(s) resulting from the use, omission or inability to use the information provided in the document.

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