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Reporting Requirement under FEMA (Part 1)

May 17, 2018     by Simratjeet Kaur

FDI begins with inward remittance. The most common form of FDI transactions is on account of issue of shares (by an Indian Company) and transfer of shares (of an Indian company) in favour of a Non-resident. The forms involved are basically of following three types,

  1. Form for reporting of inward remittance: ARF
  2. Form for reporting of issuance of shares: FC-GPR
  3. Form for reporting of transfer of shares: FC-TRS

With a view to promoting the ease of reporting of transactions under foreign direct investment (FDI), the filing of the ARF, Form FC-GPR and Form FC-TRS has been enabled under the e-Biz platform of the Government of India. The design of the reporting platform enables the customer to login into the e-Biz portal, download the reporting forms, complete and then upload the same onto the portal using their digital signature certificates. The AD banks will be required to download the completed forms, verify the contents from the available documents, if necessary by calling for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN). Physical filing of FC-GPR, ARF and FCTRS forms has been discontinued from February 8, 2016 and online filing through government’s e-Biz portal has been made mandatory.

Summarised below are the forms ARF, FC-GPR, FC-GPR and the FLA return. As mentioned in FEMA Regulations, all the prescribed reportings to the RBI are to be made through the Authorised Persons / Authorised Dealer banks Category – I Banks / Authorised Banks, as the case may be.

 

1. REPORTING OF FOREIGN INWARD REMITTANCE:
Purpose Form Name Timeline
Compliances for Companies
On receipt of remittance Advance Remittance Form (ARF) Within 30 days from the date of receipt
Compliances for LLPs
On receipt of capital contribution and acquisition of shares LLP (I) Within 30 days from the date of receipt of consideration

 

1.1 The following documents should be submitted along with both the forms ARF and LLP (I):

  1. Copy of Foreign Inward Remittance Certificate (FIRC).
  2. Know Your Customer (KYC) Report on the non-resident investor from the overseas bank remitting the amount.

 

1.2 ARF to be filed on e-Biz portal

  1. The ARF would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
  2. Sometimes, the remittance receiving AD Category – I bank (AD bank) is different from the AD bank through which FCGPR is filed. In that case, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the investee to the AD bank carrying out the transaction along with the Form FC-GPR.
  3. The filing/ reporting has to be done on the e-Biz platform at http://www.ebiz.gov.in (Home page → click on Services tab → Click on the appropriate RBI service hyperlink [RBI service page displayed] → Download eform)

 

 

2. REPORTING OF ISSUE OF CAPITAL INSTRUMENTS
Purpose Form Name Timeline
On issue of capital instruments Foreign Currency-Gross Provisional Return (FC-GPR) Within 30 days from the date of issue of capital instruments

 

2.1 REPORTING OTHER THAN ISSUE OF CAPITAL INSTRUMENTS

Besides issue of the capital instruments to a person resident outside India, the following also needs to be reported in the form FC-GPR:

  1. Issue of participating rights / interest in oil fields
  2. Issue of bonus or right shares on amalgamation / merger with an existing Indian Company
  3. Issue of shares on conversion of External Commercial Borrowing (ECB) (full conversion as well as partial conversion) / royalty / lump sum technical know-how fee / import of capital goods by units in SEZ
  4. Investment in capital instruments by Foreign Venture Capital Investor (FVCIs)
  5. Issue of shares against convertible notes

 Note: Allotment of shares under Initial Public Offer or Qualified Institutional Placement need not be reported in form FC-GPR.

 

2.2 REPORTING OF ISSUE OF SHARES TO A PERSON OTHER THE PERSON SENDING THE INWARD REMITTANCE

In circumstances where shares are issued to a person other than the person from whom the inward remittance has been received, the form FC-GPR shall be filed along with the following documents:

  1. KYC reports of both the remitter and the beneficial owner
  2. A NOC from the remitter for issuing capital instruments to the beneficial owner mentioning their relationship
  3. A letter from the beneficial owner explaining the reason for the remitter making remittance on its behalf
  4. A copy of agreement / board resolution from the investee company for issuing capital instruments to a person other than from whom the remittance has been received.

 

 

3. ANNUAL RETURN ON FOREIGN LIABILITIES AND ASSETS
Purpose Form Name To be filed with Timeline
The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian companies which have received foreign direct investment and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year Annual Return on Foreign Liabilities and Assets (FLA) Regional Office of RBI via email On or before 15th July of each year

 

For further queries on FLA Return, please refer to the FAQs on FLA Return published by RBI in this regard.

 

 

4. REPORTING ON TRANSFER OF SHARES
Purpose Form Name Timeline
Compliances for Companies
On transfer of capital instruments Foreign Currency-Transfer of Shares (FC-TRS) Within 60 days of transfer of capital instruments or receipt / remittance of funds whichever is earlier
Compliances for LLPs
To report disinvestment / transfer of capital contribution or profit share between a resident and a non-resident and vice versa. LLP (II) Within 60 days from the date of receipt of funds.

 

4.1 TRANSACTIONS FOR WHICH FORM FC-TRS NEEDS TO BE FILED

Form FC-TRS to be filed for the following transactions:

  1. To report transfer of capital instruments:
    • From a person resident outside India holding such capital instruments on repatriable basis to a person resident outside India holding such capital Instruments on a non-repatriable basis.
    • From a person resident outside India holding such capital instruments on a repatriable basis to a person resident in India.
  2. Buy back of shares pursuant to a scheme of merger / de-merger / amalgamation of Indian Companies approved by National Company Law Tribunal.

Note: Transfer of capital instruments by way of sale by a person resident outside India holding such instruments on a non-repatriable basis to a person resident in India is not required to be reported in form FC-TRS.

 

4.2 REPORTING OF TRANSFER OF SHARES WHERE FOREIGN REMITTER AND BENEFICIAL OWNER ARE DIFFERENT

Procedure for reporting transfer of shares where foreign remitter and beneficial owner are different, is same as procedure for reporting of issue of shares to a person other the person sending the inward remittance detailed in point 2.2 above.

 

Please note that above-mentioned forms (FC-GPR, FC-TRS, LLP-I and LLP-II) have been integrated into Single Master Form (SMF) w.e.f. 1st September 2018. To read more about the same, please visit Single Master Form (SMF) And The New Filing Platform FIRMS.

 

Covered under Part 1 of the blog series on Reporting Requirements under FEMA are the most common forms under FEMA such as ARF, FC-GPR, FC-TRS and FLA Return. These forms are the most commonly used forms under FEMA. Part 2 of the blog covers the not-so-common forms used for reporting transactions, like the conversion of ECB into Equity, issue of sweat equity shares, reportings to be made by for transactions on stock exchange etc. Part 2 of the series can be read at Reporting Requirements Under FEMA (Part 2).

 

 

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