APR Filing for Inactive Foreign Companies: Is It Required?

Yes. An Indian investor generally needs to file an Annual Performance Report (APR) for an inactive foreign company if the investment qualifies as Overseas Direct Investment (ODI) and no exemption applies. Zero turnover, no employees, a dormant bank account or a pause in operations does not, by itself, remove the filing requirement.

Imagine an Indian software company sets up a wholly owned subsidiary overseas to serve local clients. The expansion is put on hold before the subsidiary signs its first contract. Two years later, it still has no sales or staff, but it remains registered and the Indian parent still owns all its shares. The parent generally needs to file an APR for each applicable year. The reporting obligation follows the overseas investment, even while the subsidiary’s business is on hold.

What Is APR Filing Under FEMA?

An Annual Performance Report is a yearly report on a foreign entity in which a person resident in India has made ODI. Under Regulation 10(4) of the Foreign Exchange Management (Overseas Investment) Regulations, 2022, the Indian investor submits the report through its designated Authorised Dealer (AD) bank. The report uses the foreign entity’s financial statements and, where applicable, captures changes in shareholding and specified events involving step-down subsidiaries.

An inactive year can still produce information that belongs in the APR. The foreign company may have share capital from the original investment, cash in its bank account, unpaid professional fees or an outstanding balance with its Indian parent. Its revenue may be zero while its balance sheet still shows assets and liabilities.

Does Dormant Status Exempt a Foreign Company from APR Filing?

A foreign company may be commercially inactive, formally dormant under local law, in liquidation or already dissolved. Each status calls for a different review.

For example, if the board passes a resolution in July to explore closure and formal liquidation begins in November, keep records of both dates. The effective date under local law helps determine how to apply the liquidation exemption.

When Is APR Filing Exempt?

The Indian investor meets all three minority holding conditions

The exemption applies where the Indian resident holds less than 10% of the foreign entity’s equity capital, has no control over that entity and has no financial commitment other than equity capital. All three conditions must be satisfied. A holding of exactly 10% falls outside this exemption.

Suppose an Indian investor holds an 8% stake in an overseas company. Before relying on the exemption, the investor should check the shareholder agreement for control rights and review whether it has provided any loan, guarantee or other financial commitment. The ownership percentage is only one part of the assessment.

The foreign entity is under liquidation

Regulation 10(4) also exempts a foreign entity that is under liquidation. The Indian investor should establish when liquidation legally began and retain supporting evidence, such as a registrar extract, liquidation order or liquidator appointment record, depending on the host country’s procedure.

If liquidation follows several years of inactivity, review those earlier years separately. A schedule showing each accounting period, its APR due date and the effective date of liquidation helps the designated AD bank assess which filings were already due.

What Is the APR Filing Due Date?

The annual filing deadline is 31 December. If the foreign entity’s accounting year itself ends on 31 December, the APR for that accounting year is due by 31 December of the following year.

For example, an Indian parent may close its books on 31 March while its overseas subsidiary closes on 31 December. The APR for the subsidiary’s year ended 31 December 2025 uses the subsidiary’s accounts for that period and is due by 31 December 2026.

Can an Inactive Foreign Company Use Unaudited Accounts for APR?

The general rule is to prepare the APR using the audited financial statements of the foreign entity. Unaudited statements may be used when the Indian investor does not control the foreign entity and the host jurisdiction does not require an audit. The Indian entity’s statutory auditor certifies those statements, or a chartered accountant does so where statutory audit is inapplicable.

This matters for wholly owned overseas subsidiaries. Even if local law exempts a dormant subsidiary from audit, the Indian parent controls the entity and therefore falls outside the specific permission to use unaudited financial statements for APR filing. The parent should resolve the audit requirement before submitting the report.

How to File an APR for a Company With Zero Turnover

Confirm the entity details and accounting period: Check the foreign company’s legal name, jurisdiction, accounting year-end and Unique Identification Number (UIN) against the previous APR and original investment records. If the company changed its name or legal status, obtain the relevant registry document.

Prepare the report using the actual accounts: Check whether the company still has share capital, cash, expenses, liabilities or balances with the Indian investor. For instance, an inactive company may show zero sales and still incur registered office fees. Use the figures recorded for the reporting period.

Verify ownership and financial commitments: Compare the latest share register with the earlier APR. Check for changes in shareholding, loans, guarantees and relevant events involving step-down subsidiaries. Where multiple Indian residents have made ODI in the same foreign entity, the investor with the highest stake is responsible for filing. Investors with equal stakes may file jointly or authorise one investor to file on their behalf.

Submit the APR through the designated AD bank: Complete the prescribed form, arrange the applicable certification and provide the supporting documents requested by the bank. Keep the submitted report, accounts and acknowledgement together. Follow up on any outstanding queries because an incomplete filing is treated as non-submission.

What Happens If the Foreign Company Is Struck Off or Dissolved?

Start by collecting the final registry notice or dissolution document. It should establish the legal outcome and its effective date. Share it with the designated AD bank along with the UIN, original investment details, latest available accounts and information on any money or assets recovered. If the investor received nothing, explain how the company settled its assets and liabilities and provide the available evidence.

Ask the bank to review earlier APRs, investment exit reporting and any proceeds due as separate matters. Where the repatriation rule applies to assets distributed in liquidation, the 90-day period runs from actual distribution by the official liquidator. Where disinvestment proceeds are received, a separate 30-day reporting period runs from receipt. For a strike-off with zero proceeds, confirm how the bank wants the exit documented and the ODI record updated.

How to Fix a Missed APR for an Inactive Company

Prepare a year-wise list showing the foreign company’s accounting period, original APR deadline, filing status and available accounts. Include acknowledgements for years already filed. If the company later went into liquidation, attach the evidence showing when that process began.

The RBI prescribes a Late Submission Fee (LSF) of ?7,500 per eligible delayed APR. Under the current overseas investment regulations, the LSF facility is available for up to three years from the original due date. The designated AD bank can help establish the procedure for older defaults. An unresolved reporting delay can also restrict further financial commitment to the foreign entity or transfer of the investment.

Conclusion

An inactive foreign company generally still requires an Annual Performance Report (APR) if the Indian investor holds Overseas Direct Investment (ODI) in it and no exemption applies. A year without sales can still leave share capital, bank balances, expenses or intercompany dues to report. Prepare the APR using the foreign company’s actual accounts for the relevant period and submit it through the designated Authorised Dealer (AD) bank.

If the company enters formal liquidation, record the effective date and review whether any APRs were already due for earlier years. If it has been struck off or dissolved, share the official closure documents with the bank so it can review the pending filings and update the ODI record. Keeping the company’s legal status, financial statements and filing acknowledgements together makes it easier to establish what was filed, which exemption applies and what remains open.

Frequently Asked Questions (FAQ's)

Q1. Can I file a nil APR if the foreign company has no income?

Ans. Report the actual figures for the accounting period. Revenue may be zero while share capital, bank balances, expenses or liabilities still appear in the accounts.

Q2. Is an APR required if the foreign company never opened a bank account?

Ans. Check whether the Indian resident acquired an investment that qualifies as ODI and whether an exemption applies. Share allotment and ownership records can help establish the investment position.

Q3. Does an accounting write-off end the APR obligation?

Ans. An accounting write-off changes the carrying value recorded in the investor’s books. Check the legal ownership of the shares, the foreign company’s status and the ODI record with the designated bank before deciding which APRs remain due.

Q4. Does filing an FLA return cover the APR requirement?

Ans. The Annual Return on Foreign Liabilities and Assets (FLA) and the APR are separate filings. An Indian entity with ODI should assess each requirement independently.

Q5. What if the bank asks for an APR after liquidation begins?

Ans. Send the bank proof of liquidation and its effective date. Ask which accounting period the request covers. A query raised after liquidation begins may relate to an earlier filing period.

Q6. Who files the APR if two Indian investors hold equal stakes in the inactive foreign company?

Ans. If both investors hold the highest stake and an APR is required, they can file jointly or authorise one of them to file on behalf of both. Keep a copy of the authorisation and the filing acknowledgement with both investors’ records.

Q7. Does the first APR depend on when the foreign company starts trading?

Ans. The first sale or invoice does not determine the filing date. If the Indian resident has made ODI and no exemption applies, use the foreign entity’s applicable accounting period to determine when the first APR is due.

Q8. Can a wholly owned dormant subsidiary use unaudited accounts if local law waives the audit?

Ans. The permission to use unaudited accounts applies only when the Indian investor does not control the foreign entity and the host jurisdiction does not require an audit. A wholly owned subsidiary fails the first condition, so its parent should arrange audited financial statements for the APR.

Q9. Does an outstanding loan affect the APR exemption for an Indian investor with an 8% stake?

Ans. Yes. The minority holding exemption requires a stake below 10%, no control and no financial commitment other than equity capital. If the Indian investor has an outstanding loan to the foreign company that constitutes a financial commitment, it cannot rely on this exemption.

Q10. Can I file one APR to cover several missed years of inactivity?

Ans. Prepare a separate APR for each accounting period for which a report was due. Give the designated AD bank a year-wise list of the missed filings so it can assess which reports qualify for the Late Submission Fee facility and how to address older delays.