Reimbursement of expenses

[NARENDRA CHORE]

Our Company is 100% subsidiary of Finnish based company having office in Mumbai. The Indian company looks after execution of projects and after sales service. The manufacturing unit is located in Finland. The foreign company got one big order in Karnataka and during erection of machinery they need some items (like bolts and fabrication of small items) to be purchased locally to save time and freight. Hence they asked Indian subsidiary to purchase the items on their behalf and send to site. The foreign company told that expenses incurred by Indian company to purchase item shall be reimbursed in Euro against debit note.

Kindly advise whether such kind of transaction permissible under FEMA.

AI Summary

Finnish Company Seeks Clarity on FEMA Rules for Reimbursement in Euros for Indian Subsidiary Purchases A Finnish-based company's Indian subsidiary, responsible for project execution and after-sales service, was asked to purchase local items for a project in Karnataka to save time and freight costs. The foreign company promised reimbursement in Euros against a debit note. The query seeks advice on the permissibility of this transaction under FEMA regulations. The response by a chartered accountant suggests that understanding whether the project required RBI approval and any associated conditions or restrictions is crucial for clarity on the issue.