Any company that has received FDI or made some overseas investment during the previous years including current year by July 15, need to submit an annual return on Foreign Liabilities and Assets i.e. FLA return.
In recent times, more companies are involving themselves in foreign investments. As a matter of fact, it brings in more importance to the FEMA (Foreign Exchange Management Act) regulations.
The compliance of this act is also becoming an integral part of these companies. Foreign Liabilities and Assets (FLA) annual return is one of these compliances which organizations need to submit mandatorily. Companies involved in Foreign Direct Investments (FDI) or have invested in any foreign company either through a collaborative venture or by entirely owing subsidiaries, also known as ODI (Overseas Direct Investment) need to meet the compliance requirements.
1. Who Needs to File Foreign Liabilities and Assets Return?
As per the regulations of FEMA, the companies who have either received FDI or made ODI (“Overseas Direct Investment”) have to file FLA return. These companies must report the FLA of the current taxation year along with assets and liabilities of the previous year.
If a company doesn’t have any kind of foreign assets or liabilities in the ongoing taxation year but left with an outstanding ODI or FDI from previous years, the organization has to file FLA return mentioning the outstanding assets or liabilities.
Therefore, If the Indian company does not have any outstanding investment with respect to inward and outward FDI as on year-end then the company does not require to submit the FLA Return.
1.2 Partnership Firms Or Branches Or Trustees
Under the Foreign Exchange Management Act, the firms who are in a partnership or branches or trustees need to file FLA returns in case they have made an ODI or received FDI.
For the partnership firms, RBI will provide a dummy CIN based on the request from the company, and that can be used at the time of filing FLA annual return. If a dummy CIN is already provided, the firm can use it for filing FLA returns.
2. FLA Return Filing
- Businesses need to file FLA prior to 15th July of the following financial year. It must include all the data of ODI and FDI the company has made or received in the previous years and current year up to 15th July.
- The form must comprise financial details along with other required details according to the company’s audited or unaudited accounts. If the company doesn’t have any audited account before 15th July, they need to file FLA annual return with the unaudited accounts details. After filing the details one can audit the accounts thereafter.
- After completing the audit if it requires any changes the company will have to file another form in regard to the updated details within the last day of the month of September for the same taxation year. Just after filing the FLA annual return, the authorised member of the company will receive an acknowledgement mail from the RBI.
3. Key Points to Remember while Filing FLA Annual Return
If a company fails to file the FLA annual return within the stipulated time they will have to pay heavy penalties. In the case of non-filing, the company has to pay an amount of thrice the sum as penalty which involves the contravention.
If it’s not quantifiable, the company will have to pay a penalty of Rs. 2,00,000. In case the violation of rules continues, the company has to pay Rs. 5,000 per day as penalty.
Due date of filing FLA return is on the 15th of July of the following financial year. If the FLA return filing has been done on the basis of unaudited accounts, the company needs to submit a revised form by the last day of September of the same taxation year.
The RBI regional offices have the potential to compound the contraventions. But regional offices of Kochi and Panaji don’t have the power in this case.
4. Companies not subjected to file FLA annual return
- An Indian company without having any outstanding investment in respect of inward and outward FDI. In such cases, the companies do not need to submit the FLA Return.
- If a company has received only share application money. Alongside, if the company does not have any FDI or ODI outstanding as on end-March of the reporting year. In this case, the company does not require to fill up the FLA return.
- The organizations who have issued shares depending on a non-repatriable basis to the NRIs only
Precisely, Foreign Liabilities and Assets Annual Return filing is a must until you are not involved in foreign investments.