Q.1. What are the consequences if we don't file the FLA return by the 15th of July as our accounts have not been audited yet and we don't want to file with unaudited numbers? RBI or FEMA will impose any penalty or initiate a prosecution against the company.
Ans. The FEMA of 1999 has notified the annual return on foreign liabilities and assets (FLA Return). It is to be filed by all India-resident companies that have received FDI and/or made overseas investments in any previous year, including the current year. The failure to file the return by due date is a violation under FEMA. A penalty clause can be invoked if FEMA has been violated (A.P. Circular No. 29 (DIR series) dated February 02, 2017 (DIR Series Circular No. 29, dated 02 February 2017)
Q 2. What should be included in the FLA return if the balance sheet is not audited by the company before the deadline?
Ans. If your company's account is not audited by the deadline, that is July 15, then the FLA Return should be submitted based on the unaudited (provisional) accounts. The FLA return should be filed on July 15 based upon an unaudited account (provisional). After the audited account is submitted, and any revisions are made to the provisional data provided by the company by the end of September, the revised FLA Return can be filed based on the audited accounts.
Q 3. 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. If the March close is different, then the company can't report the information based on the closing date of the account. The information should only be reported on the reference period, which is March. Based on internal assessments, the company should report information for Marchs previous and most recent.
Q 4. Can the new company file the FLA before the deadline if the old company has not filed the FLA?
Ans. The company can submit the FLA returns after the due date if they get RBI approval.
Q 5. Can an old/new business file the FLA for the previous year? Ans. RBI approval is required to file FLA forms for the previous year (only through online FLA portal). For taking approval, they need to send mail to surveyfla@rbi.org.in.
Q 6. If an old/new company wants to delete the previous version of FLA form or modify; can the company delete/modify the FLA return
Ans. The company can delete/modify FLA returns after obtaining RBI approval (RBI will specify the due date for the FLA portal).
Q 7. What happens if a company submits the FLA in an old format?
Ans. The RBI will only accept FLA forms submitted via the online portal (old format emails-based FLAs will not be acceptable).
Definitions Q 8: What is meant by Residence of Enterprises? Q 8. What does it mean by Residence of Enterprises?
Ans. An enterprise has a centre for economic interest and is a resident of the country (economic territory) if it produces goods or services in this centre in significant quantities or owns buildings or land in that area. The enterprise must have at least one production facility in the country, and it must be planned to continue operating the facility for a long time.
Q 9. What is direct investment?
Ans. Direct investment is an international investment category in which a resident in one country [Direct Investor (DI),] purchases a long-term interest in a company residing in another country [Direct Investment Enterprises (DIEs)]. The two main components are Equity Capital and Other Capital.
Q 10. What does equity capital mean under direct investment?
Ans. The answer is yes. It includes (1) foreign equity in branches, and all shares in subsidiaries and associates (except for non-participating preferentially shares); (2) equity participation by direct investors in a DIE, such as providing machinery, land and building(s); (3) reverse investment by DIEs in their direct investor companies (i.e. Claims on DI).
Q 11. What is Other Capital under Direct Investment
Ans. The other capital component of direct investment (receivables & payables, except for equity and participating preferential shares investment) covers outstanding liabilities or claims due to borrowing of funds, lending of money, investment in debt instruments, trade credit, financial leasing, application money, etc. between direct investors and DIEs as well as between two DIEs who share the same direct investor. Direct investor's non-participating preferred shares are considered debt securities and should be included as other capital.
Identification the Indian company (Item 9 Section-I).
Q 12. What is the definition of foreign subsidiary, foreign associate and special purpose vehicle?
Ans:
Foreign Subsidiary:
If a foreign investor holds more than half of the voting rights/equity of an Indian company OR if the non-resident and its subsidiaries together own more than half of the voting rights/equity of an Indian firm, then the Indian entity is considered a Foreign Subsidiary.
Foreign Associate:
A foreign associate is an Indian company if a non-resident shareholder owns 10% or less of voting power/equity of the Indian enterprise OR if the non-resident and its subsidiaries own 10% or less of voting power/equity of the Indian enterprise.
Special Purpose vehicle:
Special purpose vehicles (SPVs) are legal entities (usually limited companies of some kind or sometimes limited partnerships) that have been created for a specific, narrow or temporary objective. SPVs are usually created by parent companies that are located in another jurisdiction (economy). They have very little employment or operations in the jurisdiction where they are formed. They are used to raise capital, or to hold assets and liability and do not usually produce much.
Companies and Entities Eligible to Submit FLA Return
Q13. Which entities are required to submit the FLA Return
Ans. Entities that have received foreign direct investment (FDI) and/or invested abroad (i.e. The overseas investment must have been made in the year before, including the current one. Who holds foreign assets and/or liabilities on their balance sheet;
A company as defined in section 1(4) Companies Act, 2013
Limited Liability Partnerships (LLPs) are registered under the Limited Liability Partnership Act of 2008.
Other [include SEBI-registered Alternative Investment Funds, Partnership Firms and Public Private Partnerships]
Q 14. If a company / LLP / Other did not receive FDI, or make overseas investment in the year prior to the current year do we still need to file the FLA?
Ans. An Indian company / LLP / Other does not need to submit the FLA return if it has no outstanding investments in relation to inward and outward FDI at the end of March of the reporting year.
Q 15. Does a company need to file the FLA return if they have only received share application money?
Ans. If the company received only the share application money, and did not have any outstanding overseas direct investments or foreign direct investments as of end-March in the reporting year then it is not required by law to file the FLA. Apart from this service ASC Group also provides services like:- SVB Registration, Noc For Steel and Virtual CFO Services. If you are looking for top Consultants for your business, then ASC Group is your one stop solution for all your needs.
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