The Foreign Liabilities and Assets Annual Return (FLA Return) is a vital regulatory requirement in India, mandated by the Reserve Bank of India (RBI) for entities engaged in cross-border financial transactions. The FLA Return is an annual filing mechanism established by the RBI to capture detailed financial information regarding foreign liabilities and assets of Indian companies. This includes entities that have received foreign direct investment (FDI) or made investments abroad. The primary objective of the FLA Return is to enable the RBI to assess and analyze the country’s overall international financial position. By compiling data on foreign equity, reinvested earnings, financial derivatives, borrowings, and trade credits, the RBI gains insights into the cross-border financial activities of Indian businesses.
Applicability:
In adherence to the regulations outlined in the Foreign Exchange Management Act (FEMA), 1999, companies involved in Outward Foreign Direct Investment (ODI) or those that have received Foreign Direct Investment (FDI) are mandated to submit the FLA (Foreign Liabilities and Assets) annual return. This filing obligation encompasses reporting for the ongoing financial year, encompassing the disclosure of assets and liabilities from preceding fiscal years. Even if a company does not possess any foreign assets or liabilities in the current financial year, but has outstanding FDI or ODI from prior years, it is still required to submit the FLA annual return, delineating the outstanding assets and liabilities.
Therefore, the following entities are required to file the FLA return:
- A Company as defined in Section 1(4) of the Companies Act, 2013.
- A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008.
- Others, including SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP), etc.
All Indian companies receiving FDI or making overseas investments, including subsidiaries, joint ventures, and associates, are obligated to submit the FLA Return. It ensures a broad scope, covering entities involved in various forms of international financial transactions.
Online Submission through FLAIR System:
The process of online submission through the FLAIR (FLA Return) system is a streamlined and digital approach for companies to fulfill their obligation of submitting the Foreign Liabilities and Assets Annual Return (FLA Return) to the Reserve Bank of India (RBI).
- Companies can access the FLAIR system through the official website of the Reserve Bank of India (RBI) https://flair.rbi.org.in/fla/faces/pages/login.xhtml. The FLAIR system is specifically designed for the electronic submission of FLA Returns.
- To begin the submission process, companies need to authenticate themselves on the FLAIR system. This often involves using secure login credentials provided by the RBI.
- Once logged in, companies will navigate through the FLAIR system to enter the required data. The system typically provides a structured form where companies input relevant financial information, including details on foreign assets and liabilities.
- The FLAIR system incorporates validation checks to ensure that the entered data adheres to the specified format and complies with the reporting requirements. This helps in minimizing errors and ensuring the accuracy of the submitted information.
- Companies may be required to upload supporting documents as part of the FLA Return submission. These documents could include financial statements, reports, or any other documentation supporting the reported foreign assets and liabilities.
- Before finalizing the submission, companies are encouraged to review the entered information to verify its accuracy. The FLAIR system may provide a confirmation step where companies can ensure that all required data has been accurately provided.
- After the review, companies can proceed to submit the FLA Return through the FLAIR system. Upon successful submission, the system typically generates an acknowledgment or confirmation, providing evidence that the filing process has been completed.
- Companies may receive post-submission communications or acknowledgments from the RBI confirming the receipt of the FLA Return. These communications may also include any additional instructions or clarifications if needed.
In Case of Non Compliance
In accordance with the modification in A.P. (DIR Series) Circular No.16 dated September 30, 2022, a Late Submission Fee (LSF) has been implemented for instances of delayed reporting in transactions related to Foreign Investment (FI), External Commercial Borrowings (ECBs), and Overseas Investment. This fee came into effect on November 7, 2017, for FI, January 16, 2019, for ECBs, and August 22, 2022, for Overseas Investment. The application of the LSF aims to establish consistency and standardization across various functions.
