Annual Performance Reporting

Oct 14, 2024 .

Annual Performance Reporting

Business Structures in USA

Neeraj Agarwal

I Neeraj Agarwal, am a Fellow Member of ICAI, practicing under the banner of M/s AAN & Associates LLP, a firm based out of  Banglore Mumbai.
I am also registered under Insolvency and Bankruptcy Board of India as a Registered Valuer for valuation of Security or Financial Assets (Passed in Feb 2020)
I am also holding Bachelor of Commerce (B. Com) degree from Calcutta University (Passed in 2011).
I have corporate working experience in Wipro. After working in Wipro for a short period I started my practice in late 2013 and have been in practice so far for the last 10 years. I have also completed a Certificate Course by ICAI on IND-AS in 2020. I have also cleared Social Auditor Exam conducted by NISM.
I have been inducted as a Special Invitee to the Sustainability Reporting Standard Board, ICAI for the FY 2023-24.

Annual Performance Reporting in Reserve Bank of India
The Annual Performance Report (APR) is a crucial document for the Reserve Bank of India (RBI) and is a mandatory annual compliance specified under the Foreign Exchange Management Act (FEMA) 1999. It is used to track the number of investments made in Joint Ventures (JV) or Wholly Owned Subsidiaries (WOS) of an Indian Party (IP) or Resident Individual (RI).

Purpose of APR
The APR is designed to provide a comprehensive overview of the performance of overseas investments made by residents of India. The Annual Performance Report (APR) serves a crucial purpose in the context of overseas investments made by residents of India. The APR helps the Reserve Bank of India (RBI) to monitor and regulate these investments, ensuring compliance with the Foreign Exchange Management Act (FEMA) regulations. This contributes to the stability and integrity of India’s financial system.
It helps the RBI to monitor and regulate these investments, ensuring compliance with FEMA regulations.

Applicability of APR
An Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) has to submit an Annual Performance Report (APR) in Form ODI Part II to the AD Bank within the prescribed time frame in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India. It covers Individual as well as non-individuals.

Filing Deadline of APR
The APR must be submitted before the 31st of December every financial year. Non-filing of the APR before the due date is treated as a violation of FEMA, and penalty clauses may be invoked.

Content of APR
The APR is prepared based on the audited financial statements of the overseas JV/WOS1. However, if the host country’s law does not mandatorily require auditing of the books of accounts of JV/WOS, the APR may be submitted based on the unaudited annual accounts of the JV/WOS.
The APR is divided into several sections, including:

  1. APR Period: This section specifies the period for which the APR has been prepared.
  2. Unique Identification Number (UIN): This is a 13-digit alphanumeric number issued by the RBI while making Overseas Direct Investment (ODI)1.
  3. Capital Structure: This section provides details about the capital structure as of the last day of the accounting year of the foreign entity.

Audit Requirement
Audited or Unaudited Financials of Overseas JV/WOS is required for filing APR but if the law of the host country does not mandatorily require auditing of the books of accounts of JV / WOS, the Annual Performance Report (APR) may be submitted by the Indian party based on the Un-audited Annual Accounts of the JV / WOS provided: The Statutory Auditors of the Indian party certify that the law of the host country does not mandatorily require auditing of the books of accounts of JV/WOS and the figures in the APR are as per the un-audited accounts of the overseas JV/WOS. That the un-audited annual accounts of the JV / WOS have been adopted and ratified by the Board of the Indian party.
Or Sometimes Even Special Audit by Indian Chartered Accountants can be done to accommodate the requirements of APR.

Penalties for Non-Filing of APR
(a) Maximum penalty @ 300% be levied (exceptionally) on investments made in JV + WOS (both)
(b) Maximum penalty be levied (generally) through computed amount referred under Foreign Exchange (Compounding Proceedings) Rules, 2000.

Conclusion
The APR is a vital tool for the RBI to monitor and regulate overseas investments made by residents of India. It ensures transparency and compliance with FEMA regulations, thereby contributing to the stability and integrity of India’s financial system.

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