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Annual Performance Report (APR) Filing in India: A Complete Guide

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Introduction

The Annual Performance Report (APR) is a key compliance requirement for Indian entities that have invested in overseas joint ventures (JVs) and wholly owned subsidiaries (WOSs). This report must be submitted to the Reserve Bank of India (RBI) via an Authorized Dealer (AD) Bank under the Foreign Exchange Management Act (FEMA), 1999.

Failure to file the APR on time can lead to penalties and restrictions on future Overseas Direct Investments (ODI). This guide provides a comprehensive understanding of APR filing in India, including its purpose, eligibility criteria, deadlines, submission process, and consequences of non-compliance.

1. What is an Annual Performance Report (APR)?

APR is a mandatory compliance document that Indian entities must submit annually to track and report the financial performance of their foreign investments in JVs or WOSs.

This filing ensures that the overseas business is functioning in line with investment regulations and helps the RBI monitor the outward flow of funds.

2. Who is Required to File an APR?

Entities required to submit the APR include:

  • Indian companies with overseas investments in JVs or WOSs.
  • Resident individuals who have invested abroad under the Liberalized Remittance Scheme (LRS).
  • Other permitted entities, such as Limited Liability Partnerships (LLPs) and partnerships, as per RBI guidelines.

Even if the foreign entity has not generated revenue or profits, APR filing is still mandatory.

3. APR Filing Due Date

The APR must be submitted on or before December 31st of every year for the previous financial year ending on March 31st.

For instance, the APR for the financial year 2023-24 (April 1, 2023 – March 31, 2024) must be filed by December 31, 2024.

If the foreign entity follows a calendar-year accounting cycle (January – December), then the APR should still be filed by December 31st of the following year.

4. Documents Required for APR Filing

To ensure a smooth filing process, the following documents should be prepared:

  1. Financial Statements of the Foreign Entity (JV/WOS)
    • Balance Sheet
    • Profit & Loss Account
    • Auditor’s Report (if applicable)
    • Notes to Accounts
  2. Investment Details
    • Equity contribution made by the Indian entity
    • Additional capital infusion (if any) during the reporting year
  3. Financial Performance Data
    • Turnover and revenue figures
    • Profit or loss details
    • Net worth of the foreign entity
  4. ODI Compliance Details
  5. Declaration by the Indian Entity
    • Confirming the authenticity and correctness of the financial and investment details.
  6. Chartered Accountant (CA) Certificate (if required by the AD Bank).

If the foreign entity’s financial statements are not available by the due date, the APR should be filed based on unaudited financial statements. However, in cases where the Indian entity does not have controlling interest, and the foreign entity’s local laws do not require audits, unaudited financials certified by a CA can be accepted.

5. APR Filing Process

Step 1: Gather and Organize Documents

  • Obtain the foreign entity’s financial statements.
  • Get them audited or certified, if required.
  • Prepare the APR in the prescribed format.

Step 2: Submit APR to the Authorized Dealer (AD) Bank

  • The Indian entity must submit the completed APR to its Authorized Dealer (AD) Bank, which processes overseas investment transactions.
  • The AD Bank will verify the details and forward the report to the RBI.

Step 3: RBI Review and Confirmation

  • If the APR is complete and accurate, the RBI acknowledges the submission.
  • In case of discrepancies, the AD Bank or RBI may request additional documents or clarifications.

6. Consequences of Non-Compliance

Failure to submit the APR within the prescribed deadline may result in:

  1. Violation of FEMA Regulations
    • The Indian entity will be considered non-compliant with overseas investment norms.
    • Future foreign investment approvals may be restricted by the RBI.
  2. Monetary Penalties under FEMA
    • A fine of up to three times the amount involved in non-compliance may be levied.
  3. Restricted Banking Transactions
    • The AD Bank may refuse to process further ODI-related transactions until compliance is restored.
  4. Compounding of the Offense
    • If the APR remains unfiled for an extended period, the entity may be required to apply for compounding of the violation with the RBI.

7. Common Challenges in APR Filing

  • Delays in obtaining financial statements from the foreign entity.
  • Lack of awareness regarding APR compliance requirements.
  • Difficulties in coordinating with foreign subsidiaries for necessary documentation.
  • Errors in financial reporting, which may lead to rejection by the AD Bank.

8. Best Practices for Ensuring Timely APR Filing

  • Maintain proper documentation for overseas investments throughout the year.
  • Request financial statements early to avoid last-minute delays.
  • Seek professional assistance from Chartered Accountants (CAs) or legal advisors for accurate filing.
  • Regularly communicate with the AD Bank to stay updated on compliance requirements.

Conclusion  

The Annual Performance Report (APR) is a crucial compliance requirement for Indian entities engaged in overseas investments. Filing the APR on time ensures smooth regulatory compliance, prevents penalties, and allows continued eligibility for future foreign investments.

To avoid complications, businesses should stay informed about RBI regulations, prepare necessary documentation well in advance, and seek professional guidance if needed.

Would you like assistance in drafting or reviewing your APR? Feel free to ask! 🚀

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