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The Foreign Exchange and Management Act, 1999 (FEMA) has made mandatory filing of APR or Annual Performance Report separately for each and every JV/WOS if they are making investments outside India. The act of Non-filing of APR before the due date of 31st December of every year shall be considered as a violation under FEMA.
JV is an acronym for Joint Venture and WOS is the acronym for wholly owned subsidiary. In the given context, both represent a foreign entity that has been incorporated according to the laws of the host country where the Indian Party (IP) or Resident Indian (RI) makes direct Investment.
A foreign entity will be considered as a JV of the IP/RI only when other foreign promoters are holding a stake along with the IP. However, in the case of WOS, the entire capital should be owned by one or more IP/RI.
FEMA prescribes a penalty for late filing of APR by a JV/WOS for their investments made outside India. The maximum penalty that can be levied cannot exceed 300% of the investments made outside India. And the minimum penalty that can be imposed is computed under Foreign Exchange (Compounding Proceedings) Rules, 2000.
For an Indian Party (IP)
The investments made outside India by an IP are termed as Overseas Direct Investments (ODIs). The maximum ODI permitted for an IP cannot exceed 400% of the effective net worth of the IP through JV/WPS which has been incorporated outside India.
For a Resident Indian (RI)
These kind of investments are known as ODIs through Liberalized Remittance Scheme. The limit under LRS has been fixed at 2.5 lakh USD for every financial year.
Filing of APR for both the IP and RI is based on the audited financial statements of the JV/WOS till 31st December every year.
Both IP/WOS are also supposed to file APR based on the unaudited financial statements of the JV/WOS upto 31st December thorough Liberalized Remittance Scheme (LRS).
Either IP or RI is required file APR on the basis of audited or unaudited financial statements of the JV/WOS till 31st December every year in physical mode.
Separate form shall be filed by every JV/OWS in from ODI Part-II as provided on the website of RBI in the process of filing of APR.
Filing of APR is done in the form of ODI Part-II by the IP/RI:
The printing of the APR shall be done on a normal A-4 size sheet and not on the letter head of the IP/RI.
Every page of the APR shall be signed and stamped by the authorized person of the IP and the last page of the APR shall be signed both by the authorized person of the IP and also by the statutory auditors of the IP.
In case, where the RI does not have statutory auditors, then RI will sign himself.
The APR along with the above mentioned documents is to be submitted physically to the Authorised Dealer Bank of the IP/RI and acknowledgement of the same must be obtained for future correspondences and references with the RBI.
The Annual Performance report is the document tracking the amount of investments made in the JV/WOS of an IP/RI and the same needs to be submitted before 31st December of every financial year failing which may give rise to penalties under FEMA. Therefore, filing of APR separately for each JV/WOS has become mandatory.
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