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[FIRC]Money received from abroad as Salary-Compliances?

(Guest)

I understand that if money is received from abroad it can be for equity purpose or loan. File fcgpr for equity & comply ecb for loan.

My query is, if FIRC states "Invoice Payment" or "Salary" or "Working Capital", what compliances to be made? Further, if no compliances are made, what are the consequences.

The issue is like the foreign company had reimbursed the money spent on salary of employees of its Indian subsidiary by remitting funds and FIRC stated as above. This was in the year 2007, no compliances were made and accounts were closed. Just want to know, is there any non-compliance, if so, on what provisions of FEMA.

Thanks in advance.

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4 Replies

Amit Sureka (Finance Manager-India) (251 Points)
Replied 10 January 2009

Regarding inflow of fund from abroad, we have to file FC-GPR in two stages. Within 30 days of received the fund through annexture II and III by the bank. This is towards obtaining UIN. Then within 90 days annexture I of FC-GPR.

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CA. Manthan Ruparelia (Chartered Accountant) (94 Points)
Replied 15 January 2009

What if the Existing shareholder wanted to transfer shares to Foreign Company what are the Compliance ?

Ashis Mahapatra (Consultant-Tax & FEMA/FDI) (183 Points)
Replied 11 March 2010

Hi Learn See first off all inward receipt for "Working capita" is strictly prohibited.Its a confirmed violation of FEMA. A capital account relationship with parent-subsidiary may be Equity/ECB(loan)/FCCB and current account transaction may be payment on account of EXIM/Royalty/Dividend etc by appropriate compliance/approval procedure. However payment against subsidiary's salary can no way be squired up by parent co remittance.However subsidiary company can claim as professional fees from parent for service rendered by its staff & in return pay to staff as salary. REMEBER HERE WE ARE DISCUSSING BETWEEN PARENT & SUBSIDIARY WHICH ARE TWO DIFF COMS.WE R NOT TALKING ABOUT INDIAN BRANCH OF FOREIGN CO. Without actual export supported by apropriate Bill/LR/Bank presentation etc, payment received as "payment against invoice " is prohibited hence a violation too. So while sending msg in swiftcode be careful ahead on descriptttion on the face of FIRC.sometimes its consequence may be worst if detected in Forex audit carried out by RBI in Bank.Such case the compounding (excuse door for less penalty)procedure may not available to party leading for heavy penalty at Enforcement Directorate.Meet Central Trade Finace dept ppl of your Bank who MAY help u resolve this issue.

Ashis Mahapatra (Consultant-Tax & FEMA/FDI) (183 Points)
Replied 11 March 2010

Hi Manthan

The Indian party need to comply with regulation "Transfer or issue of shares to Nonresident" jointly read with Regulation "Foreign investment in India".That means resident shareholder will take in to consideration the sectorial cap, valuation of share (SEBI/CCI guidelines)& other technical issues including Pre/Post compliances prescribed under above two regulation under FEMA. Of couse the Indian shareholders need to see Tax aspect too, other regulatory implication (ex IRDA for LIC Share) & Industrial Licensing etc. Both Regualtion can be checked in www.rbi.org.in > Notification > FEMA > master circulars as above