All you need to know about Foreign Liabilities and Assets (FLA) Return

All the companies (whether it is Private Companies, Public Companies, or Limited Liability Partnerships) that have received Foreign Direct Investment or made any foreign investment, have a compulsion to file FLA (Foreign Liabilities and Assets) returns. Foreign. FLA is an annual return. In this blog, we will talk about the Foreign Liabilities and Assets (FLA) Return.

What is Foreign Liabilities and Assets (FLA) Return?

Annual return on the Foreign Liabilities and Assets comes under the FEMA (Foreign Exchange Management Act),1999. FLA return is compulsory to submit by all the Indian businesses which have received FDI. And made any foreign investment in any of the last years, counting the current year by 15 July every year. 

Further, if there is non-filing of return before the due date, it will come under a violation of FEMA. And such businesses will have to pay a penalty as per the Act.

However, it becomes essential to follow the rules and regulations of the FEMA and the compliances thereunder, when the businesses include themselves with foreign investments. This return is one of the supreme crucial compliance that has to be met by the businesses that have either received FDI or made ODI.

Further, it is important to note that the 15th of July of every year is the due date for filing an FLA return. But, if there is a situation where the accounts are not audited before the due date of submission, then the FLA return shall be submitted based on unaudited or provisional accounts. And after the accounts are audited, one has to submit a revised FLA return by 30th September of the same year.

Applicability of Foreign Liabilities and Assets (FLA) Return

Following are the corporate persons who have to file FLA Return:

• Companies under Section 1(4) of the Companies Act, 2013;
• Limited Liability Partnerships (LLPs), and;
• Any other bodies like SEBI under AIFs, Partnership Firms, Public-Private Partnerships (PPP), and many more

Companies Exempted from filing FLA Return

Following are the Companies exempted from filing FLA returns:

• Companies which who do not have any outstanding balance of FDI or ODI by the end of the financial year
• The Company that has only issued shares on a non-repatriable basis to the non-residents of India
• Who has only received share application money and has not received any FDI or not made any ODI.

Filing of FLA Return

The Reserve Bank of India in the year 2019, has announced a new web-based online reporting portal that is, “FOREIGN LIABILITIES AND ASSETS INFORMATION REPORTING (FLAIR) SYSTEM”, for the determination of accept returns through the web and to stop the old-style e-mail-based system

The main features of a FLAIR system are as follows:

• FLA return is compulsory to submit by all the Indian businesses which have received FDI and made any foreign investment in any of the last years, counting the current year by 15 July every year.
• Filling entities needs to create a login name and password and complete registration on the web portal: https://flair.rbi.org.in/fla/faces/pages/login.xhtml
• The current appliance of an email-based submission of FLA forms will be withdrawn
• File the FLA return beyond a due date or file the returns for any previous years.
• Erase or change the previous version of the FLA return
• The Indian corporate bodies which do not comply with it will become defaulters under the Foreign Exchange Management Act and the regulations made hereunder.

Important Points to keep in mind before filing FLA Return

Following are some of the Important points to keep in mind for filing FLA returns:

• Due date is 15th July of each year.
• If there is a situation where the accounts are not audited before the due date of submission, then the FLA return shall be submitted based on unaudited or provisional accounts. And after the accounts are audited, one has to submit a revised FLA return by 30th September of the same year.
• If the company does not file the FLA return within the set time, then the company will have to pay a penalty of thrice the sum involved in the infringement.
• In a case the above sum is not measurable, then the company has to pay the penalty of Rs 2,00,000.
• If such infringement is continuing, then the company has to pay a penalty of Rs 5,000 per day.
• The regional offices of RBI have the power to compound contraventions without any limit. This, however, does not apply to the regional offices of Kochi and Panaji.

Conclusion

Therefore, Foreign Liabilities and Assets are an annual return. FLA return is compulsory to submit by all the Indian businesses which have received FDI. And made any foreign investment in any of the last years, counting the current year by 15 July every year. Filling entities needs to create a login name and password and complete registration on the web portal: https://flair.rbi.org.in.