Annual Return on Foreign Liabilities & Assets (FLA Return) Under FEMA

All business organizations that already gain Foreign Direct Investment (FDI) or undertaken International Capital overseas with in preceding year along with the existing year are required to submit FLA Return. In other words, organizations who do have international financial assets on their balance sheet items, must file a FLA Return. Foreign Liabilities and Assets Annual Return (FLA Return) is set forth in the Foreign Exchange Management Act, 1999.

Under FEMA 1999, most Indian domestic enterprises have already get FDI and undertaken abroad investment in any of the preceding year. As well as in the present year, they are ought to file an annualized return on global statement of financial position until July 15 of each year.

Failure to file the statement by the given deadline will indeed be a breach of FEMA, and the punishment provision might well be activated.

Foreign Liabilities and Assets Annual Return (FLA Return)

As more firms engage in international investments, the Foreign Exchange Management Act (FEMA) laws and their compliance become an important aspect of the companies’ operations. 

FLA annual returns are one of the compliances that must be satisfied by firms that engage in FDI (Foreign Direct Investment) or corporations that invest in foreign enterprises through joint ventures or fully owned subsidiaries, also known as Overseas Direct Investment (ODI). FLA yearly returns must cover all foreign investments made by and/or to the firm and must be filed directly to the Reserve Bank of India. All enterprises who received FDI and/or made abroad investment in any of the preceding year(s), including the present year, are obliged to submit an annual return on foreign liabilities and assets (FLA) (July 15 every year).

Applicability of Foreign Liabilities and Assets Annual Return (FLA Return)

FLA Returns able in accordance by the following services: –

• According  to the Companies Act, 2013, Section 1(4) define companies cover under this preview ;
• Limited Liability partnership(LLPs);
• Various firms like SEBI registered AIFs, Partnership Firms, Public Private Partnerships (PPPs), etc.

Non –Applicability of Foreign Liabilities and Assets Annual Return (FLA Return)

Companies which do not require filing a FLA statement if: –

• As of March 31, there are no outstanding investments related to FDI deposits and withdrawals.
• If the company receives only the application for shares and there are no outstanding FDI or ODI as of March 31st.
• If all non-resident shareholders of the company have transferred shares to the resident during the period and the company has not made any unpaid investment in deposit and withdrawal FDI as of March 31st.
•  However, Shares emerge by the reporting company to non-residents non-refundable.

Procedure of Filling of FLA Return

• The FLA Annual Report specifies particulars by July 15th each year. The mandatory way to submit an FLA annual report is to use an Excel spreadsheet.
• The form must be done by each authorized member of the company, from email ID to official RBI email ID.
• The members of the company authorized to submit the FLA statement are the company’s secretary, chief financial officer, and director.
• The details submitted must include financial details and other required details in accordance with the company’s audited financial statements.
• Further, if the company’s financial statement is not put forward before the due date, i.e. On July 15, the FLA statement must be set forth on the basis of unaudited (provisional) financial statements. 
• After an accounting audit is done and the preliminary particulars inform by the company is revisory
• Submit a revised FLA statement based on the audited accounting by the end of September.
• Furthermore, after submitting the FLA form, an email is sent to the email ID of the person register with the same to ratify by RBI.

 Procedure of filling FLA application by Partnership Firm

Use the excel-based FLA Return form to submit the FLA return to the Reserve Bank of India (RBI). After filling out the form, send an email to the RBI from an official email account of any authorized individual, such as the CFO, Director, or Company Secretary. When the FLA return is submitted, an acknowledgement will be sent to the authorized person’s email address.

Important pointers taken in care while filling FLA

• If the company does not submit the FLA statement within the specified deadline. However, the company will be in need to pay a penalty of three times the amount involved in the breach.
• However, if it cannot be quantified, the company will have to pay a penalty of Rs2, 00,000. If the breach continues, the company will have to pay a fine of 5,000 rupees per day.
• Further, the nearby workplaces of RBI have the strength to compound contraventions with none limit. This, however, does now no longer practice to the nearby workplaces of Kochi and Panaji.

Conclusion

Companies that have received or made foreign direct investment in any fiscal year must submit a FLA declaration to the RBI. The financial statements of a company for such a particular fiscal year may detail the status of incoming or outgoing FDI.

As more and more companies are indulge in foreign investment, the importance and compliance with the provisions of the Foreign Exchange Management Act (FEMA) has become an important part of business activities. 

FLA annual income is one of the requirements that a company that engages in Foreign Direct Investment (FDI) or that invests in a foreign company through a wholly owned subsidiary, also known as a joint venture or offshore direct investment (ODI). 

Further, FLA’s annual income must include the company and/or all foreign investments in the company and must be given in directly by the company to the Reserve Bank of India.

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