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FAQ's

FLA Full Form

FLA stands for Foreign Liabilities and Assets.

Meaning of FLA Return

It's an Annual Return on Foreign Liabilities and Assets required to be filed by an Indian Company and LLP to RBI within the prescribed due date.

This Return is filed Online on RBI Portal. The portal on which you can file the return is https://flair.rbi.org.in/fla/

FLA Return - FLAIR System, Key Points and FAQs

Requirement to file FLA Return

The Companies which have received FDI (Foreign Direct Investments) and/or made FDI abroad in any of the financial year are required to submit FLA Return to RBI.

The Financial Statement of the company for such particular FY can exactly explains the status of Inward FDI or Outward FDI.

Due date of Filing of FLA Return

The companies are required to submit the FLA Return based on audited/unaudited account by July 15 of every year.

If the FLA Return is submitted on the basis of unaudited account by July 15, they are supposed to submit the revised FLA return based on audited accounts by end - September i.e. 30th September.

Audited or Unaudited Financials

If the company's financials are not audited or finalized before the due date of submission of the Return, then FLA Return needs to be submitted on the basis of the Unaudited or provisional financials.

But this should be kept in mind that once the Financials get audited the company needs to file the revised FLA Return on the basis of Audited Accounts on the RBI Portal.

Mandatory Registration on RBI Portal

Being an online filing, the Company needs to get themselves register first on the RBI Portal for filing the FLA Return. (First Time User)

Once you open the portal you will find the drafts of Authority Letter and Verification Letter at the bottom of the page. You need to download it and get it printed and signed by the authorized person and upload it on the portal to get the registration successful. This process is for the Companies registering it for the First time.

Afterwards you can simply login through the Username and Password set by the Company. Once you enter the login details it will ask for the OTP and which will be sent to the registered Mobile number. Enter the OTP and you will be successfully logged in.

How to Start Filing the FLA Return?

Once you login, the Homepage will be displayed and on the Left hand side you will find an option 'FLA ONLINE FORM'. Click on FLA Online Form and then you will find an option 'START FILING FLA FORM'. Click on the Start Filing FLA Form the Form will be displayed and you are ready to enter the details as applicable to your Company.

Division of FLA Return

The FLA Return is divided into 5 Section (i.e. Section I to Section V). The details of the Section are explained below:-

SECTION I: IDENTIFICATION PARTICULARS

This Section basically includes the identification details of the Company. Some of the details required in this Section are Name of the Company, PAN, CIN, Name of Contact Person, Email Id, Mobile No, Nature of Business, Company Listed or Not etc.

SECTION II: FINANCIAL DETAILS

This Section requires details of the Financials of the Company. For this section we must have our financials ready, to enter the correct and exact data as on the end of the FY. The details required in this section are Total Paid-up Capital of Indian Company, Profit & Loss, Reserve & Surplus, Sales and Purchase made during the FY etc.

SECTION III: FOREIGN LIABILITIES

This Section requires details of the Investment Made in India (i.e. FDI). Some of the details are Investment in India under Foreign Direct Investment (FDI) scheme (10% or more Equity Participation), Investment in India under Foreign Direct Investment (FDI) scheme (Less than 10% Equity Holding), Portfolio Investment in India etc.

SECTION IV: FOREIGN ASSETS

This Section requires details of the Overseas Direct Investment (i.e. ODI). Some of the details are Overseas Direct Investment (10% or more Equity holding), Direct Investment Abroad (Less than 10% Equity holding), Portfolio Investment Abroad etc.

SECTION V: VARIATION REPORT

This Section is basically an Auto filled Section. It means we do not need to enter any data in this Section. It will automatically reconcile data from the rest four sections filled earlier as applicable to the company.

And being the last Section we need to click on the 'Submit Return' Option for final submission of the FLA Return for such particular FY. Acknowledgement will be received on your Email Id for successful submission of the Return.

Note: We can only open the Next Section when the earlier section are filled properly. Else we can not directly jump to the other Section. Kindly save the data before moving it to the other Section.

 

FLA Helpdesk

For any query related to the FLA Return you can either contact through phone or through an email. The Email on which the query will be answered is surveyfla@rbi.org.in. The contact details for the FLA Helpline are 022-26578214 /359 /348.

You can also go through some RBI FAQ's by clicking on the following link for better clarification of this topic https://m.rbi.org.in/Scripts/FAQView.aspx?Id=95.

Q. How to Submit FLA Return online through Web Based Portal?

Documents/Information required for Filing FLA Return

  • Valid email id & mobile number
  • Full set of financial statements (Audited/unaudited)
  • Authority and Verification letter
  • PAN card + Registration Certificate + MOA & AOA of the Company
  • Previous year's copy of FLA Return filed by the Company

A. When Company Filing First Time

i. Submit User Registration Form online.

ii. Use have to upload following documents

  • SCANNED (as PDF/JPG) and SIGNED authority letter and
  • Verification letter (SAVED AS XXXX.PDF (NOT SCANNED), NOT SIGNED)

iii. 3Formats are available on bottom of following link and given at end of editorial https://flair.rbi.org.in/fla/faces/pages/login.xhtml

  • Fill the form and attach the documents and submit with the RBI.
  • The successful registration on web-portal will enable users to generate RBI-provided login-name and password for using FLA submission gateway.

Filing of FLA every year after creation of Log IN

1. Logging on to FLA online form

Step 1: Enter your user name, new password and valid Captcha.
(The captcha is case sensitive.)

Step 2: Enter OTP code
(The user will receive the OTP on registered E-mail ID for login)

1.2 Entry in FLA online form: On successful login, the home page (dashboard) is displayed

  • Step 1: Click on the top - left option button to open Menu. Click on 'FLA Online Form'.
  • Step 2: Then click on 'Start Filing FLA form'.
  • Step 3: Then fill the required information.

FORMATS

Annex-I
Format of Verification letter

'Name of Company'
Corporate Office / Central Office
VERIFICATION LETTER

The Director

Date xx/xx/xxxx

International Investment Position Division (IIPD)
Department of Statistics and Information Management (DSIM)
Bandra Kurla Complex, Bandra (E), Mumbai
Reserve Bank of India

Dear Sir / Madam

Sub: Verification Letter for CIN / LLPIN / Others UIN(in case of Alternative Investment Fund / Partnership Firm / Public Private Partnership) and PAN of authorized person filing annual FLA form

We hereby authorize Shri. / Smt. / Ms.

Name and Designation: ­­­­­­­­­_______________________________

Having Permanent Account Number (PAN)

to register as Business user for submission of annual return on Foreign Liabilities and Assets (FLA) on behalf of our company named

Having CIN / LLPIN / Others UIN

We further confirm that the information provided herein in respect of Name and CIN / LLPIN / Others UIN of entity and PAN of authorized person is correct and the same can be treated as verified by us as per the attached authority letter.

Name of Signatory on the attached authority letter: _____________

Address:

(After furnishing all details, convert this word file of Verification Letter into pdf file and then attach the same in FLA user registration form)

Annex-II
Format of Authority Letter

'Name of Company'
Corporate Office / Central Office
AUTHORITY LETTER

The Director

Date: xx / xx / xxxx

International Investment Position Division (IIPD)
Department of Statistics and Information Management (DSIM)
Bandra Kurla Complex, Bandra (E), Mumbai
Reserve Bank of India

Dear Sir / Madam

Sub: Letter of Authorization for filing of annual return on FLA

We hereby authorize Shri. / Smt. / Ms.

Name and Designation: ________________

Permanent Account Number (PAN)____________

to register as Business user for submission of annual return on Foreign Liabilities and Assets (FLA)on behalf of our company/ LLP/ Others named _________

CIN/ LLPIN/ Others UIN ____________

Registered office at _____________

and PAN of Authorized person ____________

We further confirm that we are liable for and bound by all acts of commission and omission by the authorized representative. All acts committed by the above authorized representative shall be treated as if these acts were committed by the company/ LLP/ Others.

Yours faithfully

(Signature of Managing Director / Director / Head of Institution / Chartered Accountant / Designated Partner in case of LLP / Investment manager or Sponsor for Investment vehicle)

Name:
Designation:
Date:
Seal of the signing authority:

 

(After furnishing all details, take print out of this word file of authority letter and get it signed from appropriate authority as mentioned above and then scan it. Convert it to PDF and then upload the same in FLA user registration form).

1. Whether, in Section II- Item 2.3 of FLA Return, the Non-Resident Equity and participating Preference Shares Capital holding (%) is being calculated with respect to Item 1.0 (Total Paid-up capital) or Item 1.1 (Total Equity and participating Preference Shares Capital)?

Since Non-Participating share capital is a type of debt investment and is part of Item 1.0, Non-Resident Equity and participating Preference Shares Capital holding (%) is calculated with respect to item 1.1 (of Section II) and not 1.0.

2. In the Section II Block 2 of FLA form, what should I take for convertible preference share?

Fully diluted preference share

3. Where should we report the premium on issue of Equity Share Capital?

Premium on issue of Equity Share Capital is a part of Reserve, which should be reported under the item 4.1 of 1C- Reserves and Surplus, (in Section II).

4. What should we include in 5. Sales and Purchase (in Section II)?

In these fields, you are required to provide the information relating to all purchases [including capital (from balance sheet) and revenue of goods and services] / sales made domestically as well as foreign during the reference period (April - March).

The detailed information to be furnished in 5. Sales and Purchase are as follows:

  1. All expenses (excluding depreciation) /sales shown in profit and loss account to be taken as total purchases/total sale.
  2. Both goods and services are to be included.
  3. All foreign purchases/ sales i.e. imports and exports, should be captured fro P& L Account.

5. In Section III Block 1 of FLA form, which will be the date of first receipt of FDI received?

Take Settlement date/allotment date

6. What is meant by 'Disinvestments in India during the year'/ 'Disinvestments abroad during the year'?

Any disinvestments made by non-resident direct investor of the reporting Indian company during the year should be reported in section III item 3.0 (all blocks). Likewise, any disinvestment made by the reporting Indian company in its DIE abroad during the year should be reported in section IV item 3.0 (all blocks).

7. Where should we report the non-participating preference share issued to non-resident?

Non-participating preference shares are treated as debt securities. (a) If the Non-participating preference shares are held by foreign investor who is also holding equity shares of Indian reporting company, then Non-participating preference share should be reported at item 2.1 of 1.b FDIand 2.b DI in Section III (depending upon the % equity & participating preference share held by foreign investor) at nominal value.

8. Where should we report Fully/Partially/Non-convertible debentures issued to the non-residents in FLA Return?

Fully/Partially/Non-convertible debentures are treated as debt securities. (a) If the debentures (of any type) are held by foreign investor, the amount should be reported at item 2.1 of 1.b FDI and 2.b DI in Section III (depending upon the % equity plus participating preference share held by foreign investor) at nominal value.

9. What treatment should be given to share application money received from non-resident investor?

If the share application money is received from the existing non-resident shareholder, then the outstanding share application money should be reported at item 2.1 of 1.b FDI and 2.b DI in Section III, depending upon per cent of equity plus participating preference share holding by non-resident investor.

10. Whether, any assets or liabilities for Indian party (i.e. domestic assets and liabilities) are to be included in the FLA Return?

Any domestic liabilities or assets (even if it is in foreign currency) should not be reported in the FLA return.

11. What exactly is the meaning of 1.b ODI in Section IV under Foreign assets?

1.b ODI of Section IV on foreign assets captures the information on financial details of Overseas Company in which your company's equity holding is 10 per cent or more

12. If the overseas subsidiaries/ joint venture company's accounting period is different from the reference/reporting period (i.e. April-March) in the Return, then what information should we furnished in Section IV?

Companies are required to furnish the information on outstanding external liabilities and assets as on end-March of previous and latest year. In case if the accounting period of overseas subsidiaries/ joint venture of Indian reporting company is different from the reference period, then the information for end-March should be given on internal assessment basis.

13. In case where overseas company (DIE) is unlisted, how can we calculate the market value of overseas equity investment using OFBV method under 1.b ODI of Section IV?

For valuation of overseas equity investment OFBV Method should be used, as explained below:

OFBV Method:

Market value of equity capital held by you at OFBV for unlisted companies

= (Net worth of the DIE) * (% of equity held by you) Where,

Net worth of the DIE = Paid up Equity & Participating Preference share capital of company +Reserves & Surplus - Accumulated losses (which is automatically calculated in item 3.5 in 1.b ODI).

As per 1.b ODI of section IV the formula is given below:

Item 1.1 Claims on Direct Investment Enterprise = (Item 3.3/ Item 3.2) * (Item 3.5* Item 3.6)/100000 for reference period Where, Item 3.2, Item 3.3, Item 3.5 and Item 3.6 are extracted from 1.b ODI.

14. How will we do the valuation of the equity capital for listed DIE?

If the overseas company is listed then closing share price as on reference period, i.e. end-March of previous and latest year should be used for valuation of equity investment.

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

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 get audited and there are revisions from the provisional information submitted by the company, company can submit the revised FLA return based on audited accounts by end- September.

16. 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?

No, the company cannot report the information as per the account closing period, in case it is different from March closing. Information should be reported for the reference period only, i.e. previous March and latest March, based on the company's internal assessment.

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

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

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

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.

19. If an old/new company wants to delete the previous version of FLA form or modify; can the company delete/modify the FLA return?

Yes, company can delete/modify the FLA return after taking the approval from RBI (RBI will provide due date on the FLA portal).

Important Definition(s)

Sl. No.

Particulars

Definition(s)

1

Residence of Enterprises

An enterprise is said to have a centre of economic interest and to be a resident unit of a country (economic territory) when the enterprise is engaged in a significant amount of production of goods and/or services in that centre or when it owns land or buildings located in that centre. The enterprise must maintain at least one production establishment in the country and must plan to operate the establishment indefinitely or over a long period of time

2

Direct investment

Direct investment is a category of international investment in which a resident entity in one economy [Direct Investor (DI)] acquires a lasting interest in an enterprise resident in another economy [Direct Investment Enterprise (DIE)]. It consists of two components, viz., Equity Capital and Other Capital.

3

Equity Capital under Direct Investment

It covers (1) foreign equity in branches and all shares (except non-participating preference shares) in subsidiaries and associates; (2) contributions such as the provision of machinery, land & building(s) by a direct investor to a DIE by equity participation; (3) acquisition of shares by a DIE in its direct investor company, termed as reverse investment (i.e. claims on DI).

4

Other Capital under Direct Investment

The other capital component (receivables and payables, except equity and participating preference shares investment) of direct investment covers the outstanding liabilities or claims arising due to borrowing and lending of funds, investment in debt securities, trade credits, financial leasing, share application money etc., between direct investors and DIEs and between two DIEs that share the same direct Investor. Non-participating preference shares owned by the direct investor are treated as debt securities & should be included in ‘other capital'.

Identification of the Indian company (Item 9, Section-I).

5

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.

6

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.

7

Special Purpose Vehicle

A special purpose Vehicle (SPV) is a legal entity (usually a limited company of some type or, sometimes, a limited partnership) created to fulfil narrow, specific or temporary objectives. SPV have little or no employment, or operations, or physical presence in the jurisdiction in which they are created by their parent enterprises, which are typically located in other jurisdictions (economies). They are often used as devices to raise capital or to hold assets and liabilities and usually do not undertake significant production.

Source: https://www.rbi.org.in/Scripts/FAQView.aspx?Id=95

Disclaimer: The Article is based on the Relevant Provisions and as per the information existing at the time of the preparation. In no event I shall be liable for any direct and indirect result from this Article. This is only a knowledge sharing initiative.

The author can also be reached at contacthhpro@gmail.com


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Category Corporate Law, Other Articles by - DEEPAK SETH 



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