Filing of Foreign Liabilities and Assets (FLA) Return

Introduction

It is mandatory for all Indian companies that have received Foreign Direct Investment (FDI) and/or made Overseas Direct Investment (ODI) during the previous fiscal year to file the Foreign Liabilities and Assets (FLA) return annually, as required by the Reserve Bank of India (RBI).  The purpose of this filing is to collect comprehensive data on foreign liabilities and assets of Indian companies to facilitate effective policymaking and economic analysis. At ComplyQuick, we provide specialized services to assist companies in accurately and timely filing their FLA return. This detailed service description outlines the importance, requirements, and steps involved in filing the FLA return as per the RBI guidelines.

Importance of FLA Return Filing

The FLA return is crucial for several reasons:

1. Regulatory Compliance: Filing the FLA return is mandatory under the Foreign Exchange Management Act (FEMA), 1999. It ensures that the company complies with Indian foreign exchange regulations.
2. Economic Data Collection: The data collected through FLA returns helps the RBI in formulating economic policies, analyzing trends, and maintaining financial stability.
3. Transparency: The return provides transparency regarding the foreign liabilities and assets of Indian companies, ensuring accurate reporting and monitoring.
4. Legal Protection: Compliance with FLA filing requirements protects the company from potential legal penalties and regulatory scrutiny.

Legal Framework and Compliance

The filing of the FLA return is governed by the Foreign Exchange Management Act (FEMA), 1999, and the regulations issued by the RBI. Key regulations and circulars relevant to FLA return filing include:

• FEMA 20 (R)/2017-RB: Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017.
• RBI Circulars: Various circulars issued by the RBI from time to time that provide updates and clarifications on FLA return filing requirements.

Entities Required to File FLA Return

The following entities are required to file the FLA return:

1. Indian Companies: Any Indian company that has received FDI or made ODI in any of the previous financial years.
2. Limited Liability Partnerships (LLPs): Any LLP that has received FDI or made ODI.
3. Others: Any other entities that have received FDI or made ODI as specified by the RBI.

Key Information Required for FLA Return

The FLA return requires detailed information regarding foreign liabilities and assets, including:

1. Foreign Liabilities: This includes details of all foreign investments received by the company, such as equity capital, reinvested earnings, and other capital.
2. Foreign Assets: This includes details of all investments made by the company abroad, such as equity capital, reinvested earnings, and other capital.
3. Financial Details: Comprehensive financial details of the company, including balance sheet information, profit and loss account details, and other relevant financial data.

Process of Filing FLA Return

The process of filing the FLA return involves several steps, from the preparation of financial data to the submission of the return to the RBI. Below is a detailed overview of each step involved in the process:

1. Preparation of Financial Data

The first step is to prepare the financial data required for the FLA return. This includes compiling information on all foreign investments received and made by the company during the previous financial year. The financial data should be accurate and up-to-date to ensure compliance with RBI requirements.

2. Verification of Data

The financial data must be verified to ensure its accuracy and completeness. This involves cross-checking the information with the company’s financial records, bank statements, and other relevant documents. Any discrepancies should be rectified before proceeding with the filing.

3. Registration on RBI Portal

Before filing the FLA return, the company must register on the RBI’s Foreign Liabilities and Assets Information Reporting (FLAIR) system. The registration process involves providing basic details about the company, such as its name, CIN, and contact information. Once registered, the company will receive a login ID and password to access the FLAIR system.

4. Filling the FLA Return

The FLA return must be filled online using the FLAIR system. The form includes various sections that require detailed information about the company’s foreign liabilities and assets. The key sections of the FLA return include:

• Part I: General Information about the company, such as its name, address, and CIN.
• Part II: Details of foreign liabilities, including equity capital, reinvested earnings, and other capital.
• Part III: Details of foreign assets, including equity capital, reinvested earnings, and other capital.
• Part IV: Financial details of the company, including balance sheet information, profit and loss account details, and other relevant financial data.

The form should be filled accurately, and all required fields must be completed. The information provided should be consistent with the company’s financial records and other relevant documents.

5. Digital Signatures

The FLA return must be digitally signed by the authorized signatory of the company. This requires obtaining a Digital Signature Certificate (DSC) for the authorized signatory if they do not already have one. The DSC ensures the authenticity and integrity of the return.

6. Submission to RBI

Once the FLA return is filled and digitally signed, it must be submitted online through the FLAIR system. The submission should be done before the due date specified by the RBI, which is usually July 15th of each year. Upon successful submission, the company will receive an acknowledgment from the RBI confirming the receipt of the FLA return.

Responsibilities of the Company

The company has several responsibilities to ensure compliance with the statutory requirements for FLA return filing. These include:

Timely Filing

The company must ensure timely filing of the FLA return to avoid penalties and maintain good standing with the RBI. Delays in filing can result in additional fees and legal complications.

Accurate Documentation

Accurate documentation is essential for the successful filing of the FLA return. The company must ensure that all details provided in the return and attached documents are correct and complete.

Maintaining Records

The company must maintain proper records of its foreign investments and the filing of the FLA return. These records should be readily available for inspection by regulatory authorities and stakeholders.

Consequences of Non-Compliance

Non-compliance with the requirements for FLA return filing can have severe consequences, including:

Penalties

Failure to file the FLA return within the prescribed time frame can attract penalties from the RBI. The RBI has the authority to impose fines for non-compliance under FEMA, 1999. The penalty for late filing can be up to INR 5000 per day of delay, subject to a maximum of INR 500,000.

Regulatory Scrutiny

Non-compliance can lead to increased regulatory scrutiny, which can affect the company’s reputation and business operations. The company may face audits and inspections by regulatory authorities.

Legal Complications

Non-compliance can result in legal complications, including disputes with regulatory authorities and stakeholders. This can damage the company’s reputation and affect its business operations.

Benefits of Professional Assistance

ComplyQuick services for FLA return filing offers several benefits, including:

Expertise and Knowledge

ComplyQuick has in-depth knowledge of RBI regulations and filing procedures. Our expertise ensures that all statutory requirements are met accurately and efficiently.

Time and Resource Efficiency

ComplyQuick allows companies to focus on their core business activities while professionals handle the compliance tasks. This saves time and resources and ensures timely and accurate filings.

Risk Mitigation

ComplyQuick helps mitigate the risk of errors and non-compliance. Our thorough understanding of the regulatory landscape and meticulous approach to data verification and form preparation minimize the risk of penalties and legal complications.

At ComplyQuick, we provide comprehensive services to assist companies in fulfilling their FLA return filing obligations, ensuring that all regulatory requirements are met efficiently and effectively.

Our expertise in navigating the complexities of FEMA, 1999, and RBI regulations, coupled with our commitment to accuracy and transparency, ensures that your company remains compliant and maintains high standards of corporate governance. Contact us today to learn more about our FLA return filing services and how we can support your business in achieving compliance and fostering stakeholder trust.