Annual Performance Report (APR) for Overseas Investments: A Detailed FEMA Compliance Guide

Indian entities that have made Overseas Direct Investment (ODI) frequently receive emails or calls from their banks asking for “APR” and warning that non-submission could affect account operations. This APR has nothing to do with loan interest rates. It is an Annual Performance Report that must be filed under the foreign exchange regulatory framework whenever an assessee resident in India holds specified overseas investments.

This article explains what APR actually is, who must file it, when it becomes due, how to deal with audit requirements, what happens in case of delay, and how to respond when an Authorised Dealer (AD) Bank raises an APR request.

1. Understanding APR in the FEMA Context

1.1 What is APR?

Under the Foreign Exchange Management (Overseas Investment) Regulations, 2022 and the corresponding Foreign Exchange Management (Overseas Investment) Directions, 2022, an assessee resident in India that has made ODI in a foreign entity is ordinarily required to file an Annual Performance Report (APR) for that entity.

The APR:

  • Is a yearly disclosure relating to each foreign entity where ODI exists
  • Is routed through the designated AD Bank
  • Captures the performance and status of the overseas investment over the relevant accounting year

The reporting requirement generally continues so long as the ODI remains outstanding, subject to specific exceptions under the Regulations.

1.2 Why this reporting exists

When funds are remitted abroad for ODI, the initial transaction is reported under FEMA. APR is a mechanism for ongoing monitoring of that investment by the regulatory framework.

Through APR, the regulator receives:

  • Financial position and performance of the foreign entity
  • Details of the assessee’s shareholding and changes therein
  • Information on repatriation and other flows
  • Key developments affecting the ODI and any step-down subsidiaries

In short, APR functions as an annual compliance checkpoint for overseas investments made from India.

2. What Exactly Does the Bank Mean by “Submit APR”?

When a bank asks an assessee to provide APR for a specific financial year, it is essentially asking the assessee to:

  • Identify the relevant foreign entity and its Unique Identification Number (UIN)
  • Collect and reconcile the latest financial information of that entity
  • Determine whether audited or unaudited financial statements can be used
  • Prepare the APR in the prescribed format
  • Route the APR to the Reserve Bank of India (RBI) through the designated AD Bank

Therefore, this is not a casual spreadsheet exercise. It is a structured FEMA reporting process backed by regulatory deadlines and consequences.

3. Who Is Required to File APR?

3.1 Typical scenarios where APR is triggered

APR is generally applicable where a person resident in India has made ODI in a foreign entity. Common situations include:

  • An Indian company holds 100% shares in a foreign subsidiary
  • An Indian entity participates in an overseas joint venture
  • An assessee resident in India has ODI in a foreign operating company or special purpose vehicle

The trigger is the existence of ODI in a foreign entity in terms of the Overseas Investment Regulations, not whether the foreign entity has earned revenue or profit. Even a dormant or loss-making foreign subsidiary can attract an APR obligation.

3.2 Multiple Indian investors in the same foreign entity

Where more than one person resident in India holds ODI in the same foreign entity:

  • The Indian investor with the largest stake is ordinarily responsible for filing the APR; and
  • When Indian investors have equal stake, APR may be filed jointly.

Accordingly, the assessee should first confirm whether it is the investor required to file the APR for that particular foreign entity.

3.3 Situations where APR may not be required

The Overseas Investment Regulations provide exceptions in certain cases. Accordingly:

  • Not every overseas shareholding automatically results in APR; and
  • The nature, structure and classification of the investment must be examined with reference to the Regulations.

Before assuming an APR obligation exists or does not exist, the assessee should align its assessment with the specific definitions and carve-outs provided in the 2022 framework.

4. Audit Requirements: When Are Audited Financials Necessary?

4.1 General principle

Under the current overseas investment framework:

  • APR is generally expected to be based on audited financial statements of the foreign entity; but
  • The framework also recognises specified circumstances in which unaudited financial statements may be used.