Payment made by Foreign parent Company for capital goods for Indian entity

[Roopa Kamath]

Hi,

A US parent has made payments to a foreign vendor in foreign currency for the goods(computers and laptops) shipped to its india subsidiary. These are subsequently adjust to the monthly billing invoices of the subsidary. Are these transactions in violation of FEMA? if yes - what is the way out of this transaction and regularise these?

Foreign company has also paid for the rental deposit directly to the Indian builder for its premises office in India. Indian subsidiary did not have any bank account during this period. Are these pre incorporation expenses as per RBI/2006-2007/368A. P. (DIR Series) Circular No. 47 dt march 2007?.

Are thes etransaction violation of FEMA?. Kindly suggest or advise

[YAGAY andSUN]

Please do check whether such paid amount can be converted in FDI or Equity or as additional capital invested.

AI Summary

Foreign investment compliance: consider converting parent payments for capital goods and deposits into FDI or additional equity to regularize. Whether foreign parent payments for capital goods shipped to its Indian subsidiary, and direct payment of a rental deposit for the subsidiary's premises, contravene foreign exchange rules is queried. The advisory response recommends assessing whether those amounts can be regularised by conversion into foreign direct investment, equity subscription, or additional capital investment, and checking applicability of RBI guidance on pre incorporation expenses.