Introduction
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 an 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.
What is the annual return on foreign liabilities and Assets?
In order to capture the statistics relating to FDI in a more comprehensive manner as also to align it with international best practices, the RBI has introduced the requirement to file Annual Return on Foreign Liabilities and Assets (‘FLA Return’).
Which companies are required to submit the FLA Return?
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.
Where should we submit the FLA return?
As per earlier provision, every eligible Companies are required to submit the same based on audited/unaudited account by July 15 every year in Excel based FLA return should be sent by email to RBI.
From 28th June 2019, the present email-based reporting system for submission of the FLA return will be replaced by the web-based system online reporting portal.
It would facilitate data submission by eligible entities (including AIF) registered with the SEBI as also the reporting of foreign investment in the form of capital/profit share contribution received/transferred in case of LLPs and Investment by persons resident outside India in and Investment vehicle.
Main features of the revised Foreign Liabilities and Assets Information Reporting (FLAIR) system
a) Reserve Bank would provide a web-portal interface https://flair.rbi.org.in to the reporting entities for submitting "User Registration Form" (containing entity identification and business user details, where LLPs and AIFs will no longer require to use dummy CIN). The successful registration on web-portal will enable users to generate RBI-provided login-name and password for using FLA submission gateway and would include system-driven validation checks on submitted data.
b) The form will seek investor-wise direct investment and other financial details on fiscal year basis as hitherto, where all reporting entities are required to provide information on FATS related variables (it was mandatory only for subsidiary companies earlier). In addition, the revised form seeks information on first year of receipt of FDI/ODI and disinvestment.
c) Reporting entities will get system-generated acknowledgment receipt upon successful submission of the form.
d) They can revise the data, if required, and view/download the information submitted.
e) Entities can submit FLA information for earlier year/s after receiving RBI confirmation on their request email.
f) The existing mechanism of email-based submission of FLA forms will be discontinued.
Consequences of Non-Filing of FLA return?
Indian entities not complying with above will be treated as non-compliant with the Foreign Exchange Management Act, 1999 and regulations made thereunder.
Disclaimer: The information contained in this write up is to provide general guidance to the intended user. The information should not be used as a substitute for specific consultations. Authors recommend that professional advice is sought before taking any action on specific issues.
The author can also be reached at cs.jrmanuver@gmail.com.
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