Notification No.FEMA.295/2014-RB dated 24th February, 2014
Transfer of assets of Liaison Office (LO)/Branch Office (BO)/Project Office (PO) of a foreign entity either to its Wholly Owned Subsidiary (WOS)/Joint Venture (JV)/Others in India–Delegation of powers to AD Banks
Presently, banks can, subject to submission of prescribed closure documents, allow closure of the accounts of LO/ BO and repatriate the surplus balances.
This circular now permits banks to allow transfer of assets of LO/BO/PO, subject to compliance with the following stipulations by the concerned LO/BO/PO: –
1. T he LO/BO must have complied with the operational guidelines such as (i) submission of AAC (up to the current financial year) at regular annual intervals with copies endorsed to DGIT (International Taxation), (ii) obtained PAN from IT Authorities and (iii) got registered with ROC under Companies Act 1956. The PO must have complied with the guidelines regarding initial reporting requirements and submission of CA certified annual report indicating project status.
2. They must submit a certificate from their Statutory Auditors furnishing details of assets to be transferred indicating their date of acquisition, original price, depreciation till date, present book value or WDV value and sale consideration to be obtained. The Statutory Auditor must also confirm that the assets were not re-valued after their initial acquisition. The sale consideration must not be more than the book value in each case.
3. T he assets must have been acquired by the LO/BO/ PO from inward remittances and no intangible assets such as goodwill, pre-operative expenses must be included. Also, no revenue expenses must be capitalized and transferred to JV/WOS.
4. A ll applicable taxes must have been paid before the transfer of assets.
5. T ransfer of assets is permitted only when the foreign entity intends to close their LO/BO/PO operations in India.
6. A mounts received as a result of such transfer of assets can be credited to the bank account of the LO/ BO/PO as a permissible credit.
Banks have to submit the documents for scrutiny by their own auditors and RBI auditors. A. P. (DIR Series) Circular No. 143 dated 16th June, 2014Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons under Prevention of Money Laundering Act (PMLA), 2002 – Amendment to section 13(2) – Money Changing Activities
This circular requires Authorised Persons to nominate a Director on their Board as “designated Director” to ensure compliance with the obligations under the Prevention of Money Laundering (Amendment) Act, 2012.
