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.

[Surender Gupta]

Whether such project was subject to the approval of RBI, what was the conditions and restrictions etc. Basic facts and details would help to understand the issue in clear terms.

AI Summary

Reimbursement of expenses: cross-border reimbursement for goods procured by Indian subsidiary may require FEMA compliance and RBI approval. Reimbursement of expenses for locally procured items purchased by an Indian subsidiary on behalf of its foreign parent and reimbursed in foreign currency raises FEMA compliance issues, including whether the arrangement is an agency or permissible current account transaction, and whether Reserve Bank approval, specific documentation (invoices, debit notes, proof of delivery), and reporting obligations apply.