FEMA Export in Delhi
Fema Experts
Many Indian businesses believe that if their foreign subsidiary or joint venture makes a loss, there’s no need to file the Annual Performance Report (APR) under FEMA.
That’s 100% incorrect.
Even if your foreign entity earned zero revenue, remained dormant, or even shut down operations, APR filing is still mandatory under FEMA.
Let’s break it down in simple terms.
🧾 What Is the APR?
The Annual Performance Report (APR) is a mandatory compliance under Rule 21 of the Foreign Exchange Management (Overseas Investment) Rules, 2022, for:
- Any Indian resident individual or company
- That has made an Overseas Direct Investment (ODI)
- In a foreign Joint Venture (JV) or Wholly Owned Subsidiary (WOS)
APR must be filed annually by 31st December for the previous financial year through the FIRMS Portal.
❗ Misconception: “My Subsidiary Made No Profit, So APR Not Needed”
This is a common myth — but under FEMA:
💡 APR is mandatory regardless of profit, loss, or inactivity.
The objective of APR is not just to track earnings but to monitor the status and health of foreign investments by Indian residents.
📌 Why RBI Requires APR Even for Loss-Making or Dormant Entities
- ✅ To track whether funds remitted abroad are still legally held
- ✅ To ensure no violation of round-tripping, diversion, or unauthorized repatriation
- ✅ To verify if any capital or loan can be brought back to India
- ✅ To maintain UIN (Unique Identification Number) in active status
🧾 What If the Entity Made a Loss?
Even if your foreign entity incurred losses, your APR will simply reflect:
| Item | Sample Entry |
|---|---|
| Net Profit / Loss | (e.g., -$10,000) |
| Dividend Remitted | $0 |
| Net Worth | Reduced accordingly |
| Remarks | “Entity operational, incurred loss” or “No business activity during the year” |
There is no penalty for reporting a loss — but there is a penalty for not filing.
🔴 Consequences of Not Filing APR
| Non-Compliance | Impact |
|---|---|
| UIN Freeze | You won’t be able to make further ODI remittances |
| Bank Restrictions | AD Bank may not allow capital/loan repatriation |
| RBI Compounding | You may have to pay penalty (₹10,000–₹1 lakh or more) |
| Risk of ED Scrutiny | Non-filing could be flagged for FEMA violation |
🔍 Case Example
ABC Pvt. Ltd. had invested $100,000 in a tech startup in Singapore under ODI in 2020. The entity was dormant and incurred losses in FY 2022–23.
- APR was not filed, assuming “no activity = no reporting”
- In 2024, when they wanted to remit further funds, the bank blocked the transaction
- RBI demanded backdated APRs and a compounding application
- Result: ₹30,000 penalty + 2 months of delay in funding
📋 How to File APR for a Loss-Making Entity
- Log in to RBI FIRMS Portal
- Select APR Form linked to your ODI UIN
- Enter all financials, even if negative or nil
- Clearly mention “No dividend declared”, “Loss incurred”, or “Dormant” in remarks
- Upload supporting financials, board minutes if required
- Submit before 31st December deadline
🧠 Key Takeaways
- 📌 APR filing is mandatory — profit or no profit
- 💼 Even a dormant or loss-making foreign entity must be reported
- 🛑 Non-filing blocks future investment and repatriation
- ⚖️ RBI can impose penalty via compounding for late or missing APR
✅ Need Help?
If you’ve missed APR deadlines or need help filing for a loss-making entity, our FEMA experts can:
- File backdated APRs
- Prepare foreign entity financials
- Draft RBI compounding applications
- Liaise with your AD Bank for reactivating UIN