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

AI Summary

Inquiry on Foreign Payments for Indian Subsidiary: Possible FEMA Violation or FDI Opportunity? A US parent company made payments in foreign currency for capital goods and a rental deposit for its Indian subsidiary, which lacked a bank account at the time. The inquiry seeks clarification on whether these transactions violate FEMA regulations and if they qualify as pre-incorporation expenses under RBI guidelines. The response suggests exploring the possibility of converting these payments into Foreign Direct Investment (FDI), equity, or additional capital investment to regularize the transactions.